sec-40A(3)

Save Share

This query is : Resolved

ca rahul (Querist)

15 September 2007 can we make the payment to third party by account payee cheque (e.g goods purchases from abc ltd & payment made to xyz ltd by account payee cheque)

Late CA Sampat Jain

Late CA Sampat Jain (Expert)

16 September 2007 Yes.The only condition u/s 40A(3) is payment by account payee cheque .There is no further condition that it should be issued to seller .In section 269T, dealing with repayment of loan , the words issued in the name of depositor is there. But no such words in section 40(A)(3) is there .

CA Prasanna Krishnan V

CA Prasanna Krishnan V (Expert)

16 September 2007 Dear Sir

Issuing a/c payee cheque to one party while the real creditor is different is the one to be done with adequate care. Please ensure that necessary records are there from ABC Ltd authorising such payment officially. If not legally your position is not strong.

In addition, your assessing officer may also rise query as to the genuniness (which you can prove after taking some pain!)

CA. O.P. Agarwalla

CA. O.P. Agarwalla (Expert)

19 November 2007
40A(3)will not attract, if the payment has been made through A/c payee cheque, irrespective of the fact that the cheque has been issued in favour of some one else.