Q 5(a) XYZ Ltd. pays Rs. 90000/-for its 6 employees to a hotel as boarding and lodging expenses of such employees for a conference. The company pays amount in cash to the hotel. The Hotel gives 6 bills of Rs. 15000/-.
Whether the same will be allowable as an expense u/s 40 A (3)?
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As per section 40(A)(3) of the Income-tax Act,1961, any payment by mode other than account payee cheque or draft (in current illustration cash) to a single person in a single day in excess of 20,000 shall be disallowed. The Company has made payment to the Hotel (a single person - an assessee) in excess of 20,000. Hence, the entire expenditure will be disallowed.
Previously, 40(A)(3) was applicable bill wise. However, the amendment made it clear that it will be to a single person. Hope it clarifies
Section 40A(3) is not applicable . This section applies wherein , the expenditure as well as the payment exceeds 20,000 . Although the payment is more than 90,000 , however the expenditure is only 15,000( which is less than 20,000) . One has to judge the expenditure from the point of view of each bill , distinct from one another .
disallowed if such treatment is allowed it would be very easy to twist the law dats y payment in a single day to a single person shall not exceed rs 20000
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