Cash payment

1. It is important to note in here that sec 40A(3) disallows payment in excess of Rs. 10,000 in cash. The wordings gave in sec 40A(3) is only towards expenditure and nothing more. 
2. It is read as "where the assessee incurs any expenditure" so cash payment of Rs. 10,000 is only in relation to expenses and nothing more. 
3. In your case cash payment made in relation to sales return is allowed as per income tax act. 
Please correct me if the above solution has an alternative view. 

Ok thank you..... And i have one more doubt of cash is paid above 10000 to urd purchase other than agriculurist then should it be disallowed?

Originally posted by : Adithya
	Ok thank you..... And i have one more doubt of cash is paid above 10000 to urd purchase other than agriculurist then should it be disallowed?

Should be disallow.

Exception-

Where the payment was required to be made on a day on which the banks were closed either on account of holiday or strike. Then such payment would be allowed as an expense only when it has been proved that the payment was required to be made on the day on which the bank was closed and the payment could not have been made on a working day.

1. If the above payment is in relation to expenses then it will be disallowed u/s 40A(3). 

No u should make Payement through account payee cheque drawn on bank or account payee bank draft or use of electronic clearing system through a bank account