Section 40 a 3

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Querist : Anonymous

Querist : Anonymous (Querist)

07 May 2015 When a payment is made above 20,000/- in cash for paying advance to a vendor who supplies raw material, is it disallowed?

CA AnKiT BoHrA (AB)

CA AnKiT BoHrA (AB) (Expert)

07 May 2015 YES IT IS DISALLOWED DEAR.....!!!!

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Querist : Anonymous

Querist : Anonymous (Querist)

07 May 2015 In my case:

1.Advance of Rs.39000/- against the bill no 123; dated 1-6-14 paid in two vouchers - Rs.19500/- on 1-6-14 & Rs.19500/- on 2-6-14.

2.Advance of Rs.39000/- against the bill no 124; dated 2-6-14 paid in two vouchers - Rs.19500/- on 2-6-14 & Rs.19500/- on 3-6-14.

Now the total advance paid on 2-6-14 comes to 39,000/- but against two different bills. Is it disallowed?

CA AnKiT BoHrA (AB)

CA AnKiT BoHrA (AB) (Expert)

07 May 2015 To overcome the splitting of payments (as given above) to the same person made during a day as referred above and to increase the efficacy of the provision, an amendment was made through Finance act 2008 and after 01.04.2008, where 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, the disallowance of such expenditure shall be made under the proposed sub-section (3) of section 40A or the payment shall be deemed to be the profits and gains of business or profession under the proposed sub-section (3A) of section 40A,as the case may be.

CA AnKiT BoHrA (AB)

CA AnKiT BoHrA (AB) (Expert)

07 May 2015 so it wil b disallowed because payment made to same person in a single day crossing the limits

https://www.simpletaxindia.net/2009/12/payment-exceeding-20000-40a3-exceptions.html

Querist : Anonymous

Querist : Anonymous (Querist)

07 May 2015 in the above eg shared by me:

the amounts are paid to a transporter but since the amount is paid for freight incurred while purchasing raw material, the cost of freight is added to the cost of RM & freight charges are not accounted seperately. Indirectly, amount is paid for RM. So i need to consider 20000/- or 35000/-??

Plz let me know