Section 40A(3)

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harcharan singh (Querist)

23 June 2011 If a person has made payment of Rs 39000 to a contractor by depositing money in his bank account, will this amount be dissalowed?

CA PARAS BAFNA

CA PARAS BAFNA (Expert)

23 June 2011 It depends upon the fact that the whether the -
1. Money deposited is in connection with a business contract for which claim of expenditure is being made by him. In this case the expenditure will be disallowed.

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2. If the contractor receives the money and says that 19500/+19500/- received by him on 2 different dates (Aaj aur kal)
then the expenditure may be allowed.

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If the contract is of personal in nature say for construction of residential house,
nothing is disallowable as no ependiture is being claimed by the assessee.

harcharan singh

harcharan singh (Querist)

23 June 2011 Sir with all due respects will it not be treated as payment made to bank allowed under rule 6DD

harcharan singh

harcharan singh (Querist)

23 June 2011 And olso can u plz tell if payment in cash is made for payment of electricity bill and exceeds 20000 will it be disallowed

CA MANOJ GUPTA

CA MANOJ GUPTA (Expert)

24 June 2011 In Sri Renukeswara Rice Mills v. ITO (2006) 8 (II) ITCL 191 (Bang-Trib) It was held that payment in cash made directly to bank account of payee is not a direct payment to payee but only to credit of bank account without payee actually receiving cash and, therefore, such payment was not made in violation of section 40A(3) and, thus no disallowance could be made.
CA MANOJ GUPTA
JODHPUR
09828510543

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