11 June 2009
Payment should be made by Account payee cheque only, for Purchase of goods whether it means that payments should be made to the Purchaser only, and not to third party on behalf of purchaser.
By amendment in the Taxation Law (amendment) Act, 2006, the word "an account payee cheque or an account payee draft" was substituted for the word "a crossed bank cheque or a crossed bank draft"
11 June 2009
Sec. 40A(3) is an anti tax evasion measure.By requiring payments to be made by a/c payee instrument, it is possible to verity genuineness of the transactions and hence it is mandatory to pay through a/c payee intruments only to avoid disallowances of the expenditure under income tax act.
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