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Disallowability of expenses U/s 40 A (3) of I.T. Act


Prabeer (B. COM (H) CA & CS Final)     04 February 2011

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Please provide your expert opnion:

X Co. has given a contract for construction of factory to  A Co. (contractor).
X Co. purchased some TMT bars (construction materials) of Rs. 80,000/- in cash from a single party on a single day on behalf of A Co. and debited the account of A Co. in its books of accounts and credited cash. The bills and other documents are in the name of A Co.

I seek your opinion that whether the provisions of Sec. 40 A (3) of I.T. Act are attracted, if yes who of the two parties would be disallowed...??

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Pankaj Arora (Learner)     04 February 2011

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yes provisions of sec. 40A (3) will attract because you can not pay more than 20000/- in a single day.

Abhijeet Vasant Lande. (Chartered Accountant)     04 February 2011

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In my openion the provisions will apply to the company making payment i.e. X co.

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Prabeer (B. COM (H) CA & CS Final)     04 February 2011

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Sir,

Please clarify with supporting text from the Section..

RaviKumar s (Articled Assistant)     04 July 2012

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for X co.. expenditure will bw disallowed.. because he has made payment to the party on behalf of  A co.. In A co expenditure is allowed

 

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CA.Varalakshmi.M (Manager-Finance)     04 July 2012

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It is a capital expenditure,so no question of allowing and disallowing of expenses under 40 A (3) of I.T. Act

Sunil Kumar V.Peruru (Associate Consultant)     04 July 2012

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Under section 40A(3)Expenses are disallowed if payment is made violating the rules, like payment in cash. Purchase of TMT bar is not a revenue expense to claim. Because it is a capital expenditure which is capitalized to asset there is no relevance of section 40A(3).

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CA Sripal Jain (Associate Finance)     04 July 2012

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Super like for sunil.

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SHIVANI MAHESHWARI (CA)     05 July 2012

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Originally posted by : Sunil Kumar V.Peruru
Under section 40A(3)Expenses are disallowed if payment is made violating the rules, like payment in cash. Purchase of TMT bar is not a revenue expense to claim. Because it is a capital expenditure which is capitalized to asset there is no relevance of section 40A(3).

Agree with Mr. sunil

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CA RAJAN (CHARTERED ACCOUNTANT)     07 July 2012

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AGREE WITH SUNIL

 


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