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

Tax queries 1104 views 10 replies

Prabeer

B. COM (H) CA & CS Final

5484 Points Joined December 2007

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...??

Replies (10)

Pankaj Arora

Learner

3134 Points Joined September 2009

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

46 Points Joined June 2008

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

Prabeer

B. COM (H) CA & CS Final

5484 Points Joined December 2007

Sir,

Please clarify with supporting text from the Section..

RaviKumar s

Articled Assistant

21 Points Joined January 2012

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

CA.Varalakshmi.M

Manager-Finance

482 Points Joined February 2012

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

28 Points Joined March 2011

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).

CA Sripal Jain

Associate Finance

709 Points Joined January 2009

Super like for sunil.

SHIVANI MAHESHWARI

548 Points Joined February 2011

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).