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Dis- allowance expenditure

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Praveen Kumar

learner

51 Points Posted on 06 August 2021

Respected professionals please clarify my doubt regards disallowance expenses under section 40(A) 3

During my audit verification i had found that one expenditure made my business towards JCB works

Invoice issued by Sri Earth Movers on 15.07.2021 of r.s 14000. payment was made by the business entity on 16.07.2021. These payments were settled on two times on same day 9000& 6000 respectively ( Received by Different persons on same bill) whether it should be allowable expenditure or not.

And also clarify that Disallowance should be calculated on invoice basis or person basis

Replies (5)

Quick Summary

This discussion clarifies the tax implications of cash payments exceeding £10,000 under Section 40A(3). If a business pays £15,000 in cash for JCB works, split into two payments on the same day to different individuals representing the same supplier, the entire expenditure is likely to be disallowed. This is because the total cash payment exceeds the statutory limit for a single day's transaction.

CA. Sourav Sarkar

Chartered Accountant

24588 Points Posted on 06 August 2021

No the expenditure will be disallowed as payment exceeds 10000 rupees in cash as under section 40A(3) tells that payment should be made upto 10000 rupees in cash in a single day in a transaction. But in this case payment is 15000 rupees in cash so it will be disallowed

CA Salman Ansari

Salman Ansari & Assoc.

247 Points Posted on 06 August 2021

Were both the payments received by such "different persons" on behalf of Shri Earth Movers? Or are they made to a third party altogether on behalf of Shri Earth Movers?