The section 40A(3) of Income-tax Act, 1961 reads as under - "Where the assessee incurs any expenditure in respect of which a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, exceeds twenty thousand rupees, no deduction shall be allowed in respect of such expenditure".
The words used in the section are "any expenditure". One must understand any expenditure includes "capital expenditure" also which is claimed as a deduction from the total income.
Section 35(1) (iv)allows capital expenditure on scietific research related to the business carried on by the assessee.
Generally capital expenditure on scientific research (machinery, equipment etc.,)will be higher than the amount specified in section 40A(3). Payment for such expenditure is generally made by account payee cheques or account payee bank drafts. Hence no case law is developed till today on this aspect according to my knowledge.
I request the experts to kindly let me know if any case law is reported on this aspect. Please also inform me if there is any unreported case law.
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