Section 40A(3) of Income Tax Act

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This query is : Resolved

CA GAURAV BHATIA (Querist)

01 June 2009 If a company made advance payment to his emloyee in cash for Rs.3 Lacs, Employee deposited this sum in his personal account and made payment for expenditure exceeding Rs. 20000 on behalf of company through account payee cheque from his personal account.

Whether Provision of section 40A(3) shall apply to company? or expenditure will allow to co.?

Please comment……..

chetan soni

chetan soni (Expert)

01 June 2009 Please note, from the point of view of company you have paid this by a/c payee chq. & employee has given the statement for that.

As per my view it should be allowed, the base amount amount is paid to employee, for expenses. As he has given the statement for expenses & company has booked so by j/s in the books & balance amount recovered from employee if available.

You may even find case law for the same.

CA.BHARAT BHUSHAN

CA.BHARAT BHUSHAN (Expert)

01 June 2009 It is complex treatment you are doing...I think you should first transfer Rs.300000/- in separate Account like suspense and should not show advance to employee.The cash given to ur employee will not change the total cash balance of ur concern and then start to transfer the amount from suspense to expenditure account when they are incurred.

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