Section-40(a)(3) of income tax act'1961

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This query is : Resolved

ankit agrawal (Querist)

22 August 2013 Dear Sir/Mam,
IS any exp.incurred is of rs.21,000/-and payment is done through staff imprest.i.e. chq.given to staff in staff name for payment of party.
Afterwards,payment is done by staff in cash to party of 21,000/-then,this exp.is allowed or not under income tax act 1956?

CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)

22 August 2013 Sec.40A(3) will apply even payment made through employee reimbursement, the particular expenses reimbursed will be disallowed subject to exception under rule 6DD

CA PARAS BAFNA

CA PARAS BAFNA (Expert)

22 August 2013 In CIT V Vijay Kumar Ramesh Chand, the Pune Tribunal held that the employee is not an agent. The facts of the case were slightly different. In the above case- the employee has directly deposited cash in the bank accounts of the well identified suppliers.
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In your case as the payment has been released through an account payee cheque to the employee, in my view, Section 40A(3) is duly complied with at the first instance. Here the employee can be treated as an agent to perform the work of his principal. So the exception under clause (k) of Rule 6DD also covers such transaction.
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In my view, the expense can not be disallowed.
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CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)

22 August 2013 Agree with Mr.Paras Bafna sir, I have not looked the first instances of payment by cheque to employee..

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