Sec 40A(3)

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Preksha (Querist)
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08 December 2009 I want all u experts to join us in a popular discussion "Sec 40A(3)" . As v need an expert opinion.
D discussion is goin too long plz help us.
The query is
'If an enterprise pays Rs. 15,000/- pertaining to a particular expense and also pays Rs. 16,000/- pertaining to some other expense (both in cash) on a single day and to a same party then will this expense be allowed or disallowed u/s 40A(3)??'

CA SURENDRA KUMAR RAKHECHA

CA SURENDRA KUMAR RAKHECHA (Expert)
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08 December 2009 These expenses will be disallowed.

The section 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,...........

The word "any expenditure" covers all types of expenditures.

The purpose of this section is to avoid heavy cash payments in normal circumstances so that connected persons are taken into tax-net. In this way; they will be identified.

Ca Rakhecha
Surat

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