sec 40A(3), payment xcding 20000

This query is : Resolved

sagar (Querist)
Follow

16 July 2010 suppose there is an employee whose monthly salary is 50,000 rs.
he has been paid 35000 cash as advance which will be deducted from his next month's salary
whether this 35000 cash p'ment will be disallowed u/sec 40A(3)

Srikant

Srikant (Expert)
Follow

16 July 2010 This is an advance and Not an Expenses.

however the same should have been paid by Cheque.

I can suggest that break the amount in 2/ 3 different dates.

sagar

sagar (Querist)
Follow

16 July 2010 sir as it will not be d'llowed ,why p'ment through cheque is reqd. ???

Upgrade to CAclubindia Pro. Subscribe Now!

DR GAURAV GUPTA FCA, FCS, LL.B

DR GAURAV GUPTA FCA, FCS, LL.B (Expert)
Follow

16 July 2010 it is not allowed because this exp is allowable on later date hence it will not be allowed when u will recognise it as an exp

Manmohan ACA, CS

Manmohan ACA, CS (Expert)
Follow

16 July 2010 this 35000 cash p'ment will be disallowed u/sec 40A(3) when it is adjusted

--------------------------
take an example
advance salary paid in March,2010 Rs. 80000 (in cash)
same adjusted with salary of April, 2010

Disallowed in P.Y. 2009-10 (A.Y. 2010-11): NIL
Disallowed in P.Y. 2010-11 (AY. 2011-12): Rs. 80000

sivadas chettoor

sivadas chettoor (Expert)
Follow

17 July 2010 Advance is an asset and not an expenditure.But when you adjust the advance against salary, then it will be treated as an expenditure for which payment has been made in excess of Rs 20000.

siva208@yahoo.com

sagar

sagar (Querist)
Follow

17 July 2010 that means if this advance of 35,000 will get adjusted in 5 months(7,000 in each month)it will not attract sec 40A(3) ???

sivadas chettoor

sivadas chettoor (Expert)
Follow

17 July 2010 Yes Mr.sagar....

Upgrade to CAclubindia Pro. Subscribe Now!

Manmohan ACA, CS

Manmohan ACA, CS (Expert)
Follow

18 July 2010 hat means if this advance of 35,000 will get adjusted in 5 months(7,000 in each month)it will not attract sec 40A(3) ???

no, even it is adjusted on same day with different bill, No disallowance u/s 40A(3)

sagar

sagar (Querist)
Follow

19 July 2010 thanx mr.manmohan,mr.gaurav gupta,mr.sivadas & srikant sir.....
i hope u'll all help me like this in future also......