Section 40A(3) - Cash Transaction > Rs.20,000

This query is : Resolved

Narendran (Querist)
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22 September 2008 Dear SIr,

I am working in a construction company. In our working site, our workers met an accident and we bring them for hospitalization. In that occassion, for medical treatment we have paid cash which more than Rs.20,000.( Other than no option available) but which is against the section 40A(3). Noew kindly give me a solution how can i debit that amount in our Cash book and moreover confirm that the above said situation is exceptional. Pls urgent

CMA Gul S

CMA Gul S (Expert)
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22 September 2008 Hi Narendra,

Only payments made for the govt dues in cash are acceptable.

Other than that all expenses are disallowed, i do not find any solution for this and you cannot debit this to your books of accounts

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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22 September 2008 I feel Gul is correct.

CMA Gul S

CMA Gul S (Expert)
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22 September 2008 Thanks For Ackoledgement Mr Chakrapani

CMA Gul S

CMA Gul S (Expert)
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22 September 2008 Thanks For Acknowledgement Mr Chakrapani

CA E.A.Ravikumar

CA E.A.Ravikumar (Expert)
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22 September 2008 Hi Naren
Pl let me know whether you have paid this to the workmen or to the hospital & whether the hospital is not willing to accept cheque.

You can always this in your staff welfare account. Ensure that you account this in your books of accounts. There cannot be a case where the company spends but does not account.

on the tax allowability, 40A(3)has to be
read along with rule 6DD which lists cases and circumstances in which payment in a sum exceeding twenty thousand rupees may be made otherwise than by a crossed cheque drawn on a bank or by a crossed bank draft. The objects of the provision is to curb flow of black money and not to put an impediment over the trade and business.

In Girdharilal goenka vs CIT, it was pronounced that the ITO should take a practical approach to problems and strike a balance between the direction of law and hardship to the assessee. He should not enmesh himself in technicalities. After all, the object is not to deprive the assessee of the deduction which he is otherwise entitled to claim.

Your tax auditor can make an appropriate note and this can be explained to the authorities.

Narendran

Narendran (Querist)
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24 September 2008
We have paid the amount to hospital

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