Cash expense

Suppose company deposit  Rs 50000 in employee account and employee withdraw money from bank and purchase the goods Rs 50000/-.That expense is allowed in income tax or not becoz ultimate payment in cash for that expense

by passing the entry Employee A/c Dr

                                      To cash A/c

and afterthat 

Party A/c Dr.

To Employee

Replies (2)

No. The Expeses will be disallowed. However a cluse in Rul 6DD says

(k) where the payment is made by any person to his agent who is required to make payment in cash for goods or services on behalf of such person.

An employee necessarily his agent. But the condition that whether required to make payment in Cash for ....... we have to see that condition

Sir for Purchasing the goods

Entry passed(1) employee a/c dr

                           To Bank a/c

                        (2)  Purchase A/c Dr.

                               To Party a/c

                       (3)   Party A/c Dr.

                               To Employee A/c

In the bill it is specifically written that payment is made in cash i.e above rs 20000

 

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