Exception to 40A(3)

 

Hi,

 40A(3) is not applicable to..........

(k) Where the payment is made by any person to his agent who is required to make payment
in cash for goods or services on behalf of such person.

If a company pays Rs. 50,000 to one agent to make a payment to govt. department.  This agent is making payment of Rs.53,000 after 3 days + 5,000 other related expenses.  Company is making payment of balance of 8,000 to agent on submission of his account details.

whether 40A(3) is applicable here or is this payment allowable?

Replies (4)

Dear Pradeep Sir,

In the present case this payment is allowable, since Rs. 53,000 acn be paid in cash & the balance expenses of  Rs. 5,000 has not exceed the limit of 20K.....

But the answer would have changed if the agent's related expenses exceeded Rs. 20k, say 21K, now on Reimbursment of Rs. 24,000/- (21000+3000), Rs. 21,000 will be disallowed u/s 40A(3)...& remaining will be allowed as covered by Rule 6DD

Dear Pradeep Sir,

In the present case this payment is allowable, since Rs. 53,000 acn be paid in cash & the balance expenses of  Rs. 5,000 has not exceed the limit of 20K.....

But the answer would have changed if the agent's related expenses exceeded Rs. 20k, say 21K, now on Reimbursment of Rs. 24,000/- (21000+3000), Rs. 21,000 will be disallowed u/s 40A(3)...& remaining will be allowed as covered by Rule 6DD

Dear Pradeep...

yes, the Payment is allowable because Rs. 53,000  paid in cash to govt.dept...- exception & the expenses of  Rs. 5,000 has not exceeded the limit of Rs.20000/-.....

Dear Pradeep Sir

Find attached the notification issued by Income Tax no.97/2008 dt 10/10/2008 for your reference.

Regards

Sanket Karve

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