Dear Friends
I have an urgent query regarding the purchase expenses allowed u/s 40A(3),Assessee having a business of outdoor catering of events, marriages etc,he purchases vegetables,mlik,spices & other conumables in cash of exceeding Rs 20000/- in a single day to single person,whether such expenses are allowed or not or added in income of PGBP?
My another question is whether purchase of Fixed Assets in cash of exceeding Rs 20000/- is allowable or not?
Thanks in advance
In my view Expenses is not allowed exceed Rs. 20000/- in cash or Fixed asstes also purchase exced Rs. 20000/-
Dear,
1.As per sec 40A (3), Any Expense incurred, of which AGGREGATE payment made to a person (Single) Exceeding Rs.20000, whole of expenses will be disallowed.
2. Expense suggest only Revenue Expense not Capital.
3.Hence, In ur case >20000 paid for purchase will be disallowed and will be added in PGBP income while Payment made for Fixed assets would not have any effect though > 20000 in cash because its a Cap Exps.
4. Logic:- Revenue Exp (Purchase) we need to get deduction for reduction in N.P but
by purchasing Fix assets no effect in Profit or say in tax.Hence no restriction in >20000.paym in cash.
Expense > 20000 for single day.(I miss in def above).
Depreciation will not be allowed for Income tax computation purposes if fixed asset is purchased in cash in excess of rs20000
Rule 6DD (f)
where the payment is made for the purchase of—
(i) agricultural or forest produce ; or
(ii) the produce of animal husbandry (including hides and skins) or dairy or poultry farming ; or
(iii) fish or fish products ; or
(iv) the products of horticulture or apiculture,
to the cultivator, grower or producer of such articles, produce or products;
| Originally posted by : PHANI KUMAR VANAMALA | ||
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Rule 6DD (f) where the payment is made for the purchase of— (i) agricultural or forest produce ; or (ii) the produce of animal husbandry (including hides and skins) or dairy or poultry farming ; or (iii) fish or fish products ; or (iv) the products of horticulture or apiculture, to the cultivator, grower or producer of such articles, produce or products; |
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This is applicable only when payment is made to cultivator, grower or producer of such articles, produce or products directly and not to the retailer.
If proper banking facilities are available in that area then the assessee should convince the retailer to accept cheques considering the business he gives him regularly.
Fixed assets are not covered under RS 20000/- limit.
CAclubindia
