Cash payment more than 10,000

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In which of the following cases (one or more), disallowance u/s 40A(3) is attracted ?

(1) payment of Rs.11,000 to Mr. A for stationery exps

(2) payment of Rs. 6,000 to Mr.A for stationery exps, Rs. 7,000 to Mr.A for Repairs and maintenance

(3) payment of Rs. 6,000 to Mr.A for stationery exps, Rs. 7,000 to Mr.B for Repairs and maintenance

(4) payment of Rs. 5,500 to Mr.A for stationery exps on 1/1/2018, 5,500 on 2/1/2018

(5) payment of Rs. 5,500 to Mr.A for stationery exps on 1/1/2018, 5,500 on 1/1/2018

 

Replies (18)

I think 1,2,5 will attract

but in case 2 there are two payments for two different transactions

so, I cannot exactly say.

however, 40A(3) not mentioned about transaction, it says that 'if a payment is made above 10,000 in a day for any expenditure in any mode other than the 3 specified modes, then that expenditure is disallowed'

since the word any expenditure is used

case 2 attracts disallowance, as there is a payment of Rs. 13,000 to single party smiley

Sec 40a(3)assessee incurs any expenditure in respect of which a payment or aggregate of payments made to a person in a day.

Means single expenditure AND single person AND single day

In a single payment OR aggregate payment.

So, only case (1) will disallow.

why not (5)

in 5 he splitted the 11,000 to 2 5,500 invoices

Sorry, my mistake case (5) also will disallow.

40A(3) text : Where the assessee incurs any expenditure in respect of which a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, 18[or use of electronic clearing system through a bank account, exceeds ten thousand rupees,] no deduction shall be allowed in respect of such expenditure.

in 1,2,5 a person, a day, a payment or aggregate, any expenditure all the conditions are satisfied

therefore 1,2,5 attracts disallowanceangel

as per provision 40A(3) the cases (1), (2), and (5) attract the disallowance of payment.
1,2 & 5 is disallow as per sec...

Point no 4 is not cleared it's in single bill or two separate bills...?!
case 4 is single transaction & single invoice, but payment made two times, to avoid disallowance
See, If there is a situation like;

(1 Bill + 1 Person + 1 day ) exceeding 10,000/- only then disallowance is attracted. Now make as many case as you want answer would Always be correct.

Btw in the given case, 1 & 5 is disallowance cases.
Wow @ Nitesh Bind Such an Awesome Crux..! You are amazing. 😊
You guys are always Most Welcome. ☺️

Section 40A(3):-

Where the assessee incurs any expenditure in respect of which a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, 18[or use of electronic clearing system through a bank account, exceeds ten thousand rupees,] no deduction shall be allowed in respect of such expenditure.

Based on application of Provision case 1,2,5 will be disallowed.

Neither in given Section it is mentioned that Limit of 10000 is per Bill nor it is mentioned that limit is per Expenditure.

Limit is per Person in a day. 

Sorry to some person but we have to apply section of any law based on general practices in law rather than own Interpretation of law.(per bill /per Expense 😂🤣😁😜  )

Dear Prakash Joshi,

There is something which is found in every kind of LAW (i.e. Called Judgements and case; Hope you have heard about that).

No...?? Okay you will get to know in some years.
BTW You are toooooo Funny!!! Isn't it.. (😂🤣)


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