Sec 40a(3)

This query is : Resolved

Bibhuti Bhusan Moharana (Querist)
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30 March 2014 Hai Friends,

I hav one doubt regarding S.40A(3), It is as follows.

Day1 Bill amount 15000
Day2 Bill amount 18000
Day3 Bill amount 13000

on a single day payment made Rs25000

weather disallowance U/s 40A(3)will come or not ?
The above illustration given in vinod gupta and as per the author no disallowance will attract. please suggest.

Nikhil Kaushik

Nikhil Kaushik (Expert)
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30 March 2014 well one opinion is that no disallowance is attracted. this opinion will hold good where the the bills against which the payment is made are genuinely separate bills. for eg, rent paid for three different months in cash on a single day.

however, where a single transaction is split in multiple invoices or where payments are staggered over a period to circumvent Rs 20000 limit, such transactions can be disallowed

Nikhil Kaushik

Nikhil Kaushik (Expert)
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30 March 2014 also refer cbdt notification 97/2008

Bibhuti Bhusan Moharana

Bibhuti Bhusan Moharana (Querist)
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31 March 2014 Thanks sir for ur suggestion.but the reference you have given (notification 97/2008) it talks about exception listed in rule 6DD.

Can you tell me the basis on which you r telling that no dis allowance will arise ?

Further section 40A(3) does not distinguish
weather a payment is genuine or not

Nikhil Kaushik

Nikhil Kaushik (Expert)
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31 March 2014 as such no disallowance is required because there are three separate expenses for which payment has been made. The section takes about an expense. So if you have multiple invoices, so you can make payment against them in cash as long as each invoice is less than Rs 20000

however, there was been instances of splitting payment or splitting the invoices to avoid 40a(3). in such cases disallowances have been made.

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