Cash Payment u/s 40a

Tax queries 582 views 3 replies

Dear Colleagues,

Our company is a engineering company. There is a practise that company will deposit cheque in the a/c of employee for expense and local purchase to be done at site. Than the concerned employee pays cash to contractors as an advance payment and also does purchases in cash exceeding Rs. 20K in a single day. The company at HO will directly debit either contractor's account or purchase account and credit employee account.

Pl. let me know, whether this will be disallowable U/s 40a(3) even though company pays by cheque to employee but employee does payment in cash.

Replies (3)

Employee is spending the money on behalf of the company i.e. in the capacity of an Agent, hence 40A(3) will be applied for cash payments made by the employee on behalf of the Company.

Almost all yhe companies are deposit cheques into the account. this practise has been following from many years and always been followed.

 

Term Papers

Since the company directly debits the contractor's account, 40A(3) will be applicable.


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