Cash Payment u/s 40a

Nimesh Sheth (DGM-F&A) (33 Points)

04 September 2010  

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.