40 A (3)

Sec. 40A(3) is attracted only when both expenditure and payment exceed 20000.

in your case there are 3 separate bills, they are separate expenses and thus 40A(3) in not applicable.

IT WILL BE DISALLOWED

The Section reads as below..

"Where thee assessee incurrs any expenditure in respect of which a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, exceeds twenty thousand rupees, no deduction shall be allowed in respect of such expenditure"

In this case, the interpretation can be drawn that, the employee had incurred three expenditures in respect of travelling all of them being less than Rs.20000/-. As the Section speaks of "any expenditure", it means a single expenditure and not a bunch of expenditure. In your case, there are three expenditures and the payment is made in respect of three vouchers all of them being less than Rs.20000/-. So, in my opinion, the expenditure shall not be disallowed.

Regards, 

all of above are correct....... except G.K.............

Well, i interpret it differently Mr Love Arora.

Thanks to Amol sir for quoting the section for me.

It does not say one expenditure  exceeding Rs.20,000 does it? Please see clause 13 of the General clauses interpretation act, 1897. It says that in a central statute, unless there is an indication to the contrary, the singular denotes the plural. Expenditure denotes expenditures. Do we say incomes and expenditures account? 

You can look up a dictionary for the meaning of the word "any". The word "any" does not mean one. It is to interpeted according to the context of the statute, which in this case was to plug the flow of black money and fictitious expenses. 

"Where the assessee incurs any expenditure in respect of which a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, exceeds twenty thousand rupees, no deduction shall be allowed in respect of such expenditure".

The emphasis is clearly on the payment or aggregate payment exceeding Rs.20,000 on a day to one person. Contemporaneous interpretation of law would be that if the prescribed limit is crossed, it should be disallowed.

Mr. Love Arora, please show me, where in the act, there is a provision to show that each expense should exceed Rs.20,000/-. I will be glad to be PROVEN wrong. 

I think if the travel (for the 3 bills) is for the same place and for the same purpose, it is disallowed.. else allowed... Can anyone pls clarify the same????

As debated by Mr. G.K., i would like to tell him that law is interpreted literally unless and until there is some ambiguity in it or it gives absurd meaning.

You refered to General Clause Interpretation Act for presenting your point, but dear G.K. since the Section itself is very much clear and gives only one meaning, there is no need to refer any other law.

The Law makers have drafted this section and amended it from time to time to curb cash transactions exceeding Rs. 20000 against a single bill. The aim was to curb practices adopted by large tax payers and not small tax payers.

A prudent business man, shall never make several bills for a single item billing an amount below Rs. 20000 at the request of customer. Rather, he will insist on to receive payment by cheque to stay away from the ambit of this Section.

Keeping this thing in mind, the section was amended.

The limit for Rs. 20000 was fixed to give some flexibility in tax system, it didn't curb cash payments in toto. Even in today's time we can make payment in cash upto Rs. 20000 for anything we purchased/service availed.

The zist of section is therefore, if payment against ONE bill is made in excess of Rs. 20000 in A DAY, the whole expenditure will be disallowed.

Well in reply of Mr. G. K. comments,

I would like to say that if you read the section it clearly states that, Quote"Where the assessee incurrs any expenditure in respect of which a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, exceeds twenty thousand rupees, no deduction shall be allowed in respect of such expenditure" unquote.

So if you read these underline texts carefully there should not be any confusion that assesse should have incurred the expenditure  and also payment has been made in respect of those expenditure should be considered the unanimous condition for applicability of this very section. So it is one to one relationship between expenditure and payment.

So in my view singularity & plurality is not the matter, as G.K>.has said.

Dear Reetika and Abhishek,

you seem willing to discuss.

How many houses can you build to claim exemption u/s 54 of the income tax act?

Even though the act says "a" house, applying section 13 the general caluses act, the HC of Karnataka has said, HUF go ahead, build 2. See 309 ITR 329, 2009

Perhaps i am not able to convince you... there i have lost the battle.

But, if you observe, "any" is always used in a singular sense, but it denotes a plural meaning.

See this sentence: If any batsman scores below 10 runs against Bermuda, such batsman shall be dropped from the team.

It goes without saying that if 5 batsment score below 10, all of them will be dropped. It is not necessary to say "all such batsmen shall be dropped"

I have lost the battle like i said, but i am still holding on my belief and i will disallow it. Please see books for examinations from may 2009 onwards, any author. The no of bills is irrelevant.

Hello mr. G.K.  Thanks for being part of this discussion. Please dont call it battle. its not battle. it was a discussion and at last we have reached a solution. Nobody looses and nobody wins here.