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Applicability of Sec-40A(3) of the IT ACT,1961

Krishna Prasad (Partner) (260 Points)

24 August 2009

X LTD PURCHASED GOODS ON CREDIT BASIS. AFTER THAT X LTD PAID THE AMOUNT IN CASH EXCEEDING Rs.20000/- TO THE CREDITOR BY DEPOSITING DIRECTLY IN TO THE BANK ACCOUNT OF THE CREDITOR.

IS SEC - 40A(3) APPLICABLE TO THOSE TYPE OF TRANSACTIONS

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11 Replies

prateek (CA Final) (355 Points)
Replied 24 August 2009

yes it is applicable

Giridharan K (Student) (123 Points)
Replied 24 August 2009

Yes it is applicable. Since the payment is made directly to the bank a/c of the creditor no disallowance comes.

RITESH KOTHARI (B.COM, FCA, DISA(ICAI)) (778 Points)
Replied 24 August 2009

YES SECTION 40 (A)(3) IS APPLICABLE.

CA Kingsley (Audit Manager) (470 Points)
Replied 24 August 2009

No no. It doesnt come under 40A(3). It comes under exemption as per rule 6DD

ca tarun sharma (SERVICE) (277 Points)
Replied 24 August 2009

it will be disallowed u/s 40A(3) since payment is made by other than a/c payee cheque or bank draft it will be treated as payment made in cash because it is irrelevant who deposit cash in bank and also there is no identification of source of receipt

CA Kingsley (Audit Manager) (470 Points)
Replied 25 August 2009

Sir,

there are lot of cases of exemption where in if you pay such a manner, then 40A3 will not be applicable even though you dont pay by account payee cheque or draft like payment during bank strike, payment to agricultural people, payment thro depositing in bank account etc. These list comes under rule 6DD. I kindly request the others to go thro rule 6DD which contains those explanation.