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40a (3)

CA SONIYA AGARWAL (self practice) (3005 Points)

03 September 2014

Ek expense bill 45000/-ka hai I paid 15000 day 1 , 15000 day 2 , 15000 day 3 will this expense be allowed if I paid each in cash

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11 Replies

jaimin (Finance Executive) (465 Points)
Replied 03 September 2014

yes as the expense has not increased Rs.20000/- per daily basis, but kindly take care that you will not get receipt of 45000/- at single receipt otherwise it get disallowed u/s 40a(3)

1 Like

CA SONIYA AGARWAL (self practice) (3005 Points)
Replied 03 September 2014

If there are 4 bills of such type from different person than n in total for each bill taken together crossed 20000 will it be allowed

Sakthi Baskaran (Chartered Accountant) (141 Points)
Replied 03 September 2014

The section talks about payment to each person in a single day.if they are from different persons it will be allowed.

CA Sanket Gujar (Professional) (74 Points)
Replied 03 September 2014

Either take 4 bills for less than 20000 on different days or though wrong make payment in the name of different persons on a single day

JIBIN THOMAS BABU (CA FINAL STUDENT) (147 Points)
Replied 04 September 2014

CASH PAYMENT EXCEEDING Rs. 20,000

Sec 40A(3) of Income tax Act, 1961

Section 40A(3)(a) of the Income-tax Act, 1961 provides the at any expenditure incurred in respect of which payment is made in a sum exceeding Rs. 20,000/- otherwise than by an account payee cheque drawn on a bank or by an account payee bank draft, shall not be allowed as a deduction.

if payment is being made for plying, hiring or leasing goods carriages then Limit for these section is Rs. 35000/-,instead Of 20,000/-

Section 40A (3) is an anti tax-evasion measure. By requiring payments to be made by an account payee instrument, it is possible to verify the genuineness of the transaction thereby mitigating the risk of evasion.

Aggregate Payment has to be seen: After the amendment w.e.f 2009-10 if a person makes more than one different purchases for cash from same person in excess of Rs 20,000 in a single day even though on separate cash memos, such aggregate payment will be disallowed u/s 40A(3)

JIBIN THOMAS BABU (CA FINAL STUDENT) (147 Points)
Replied 04 September 2014

Dixit (CA Final) (2405 Points)
Replied 04 September 2014

Agree with Jaimin

Anisha Sharma (Student CA Final ) (49 Points)
Replied 04 September 2014

Income-tax Act, 1961 provides the at any "expenditure" incurred in respect of which payment is made in a sum exceeding Rs. 20,000/-but does this word "expenditure" also covers payment done for purchase of goods??

Anisha Sharma (Student CA Final ) (49 Points)
Replied 04 September 2014

Brahma Nand (Finance associates) (63 Points)
Replied 05 September 2014

Expenditure and purchase both is diffrent things.....

Ramakrishna Kamat (CA) (76 Points)
Replied 05 September 2014

The Supreme Court in the case of Attar Singh Gurumukh Singh V ITO 1991 191 ITR 667 has held that the disallowance under section 40A (3) covers all outgoings including purchase of stock in trade.