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Immidiate reply is required....... can you help please

Sagar Sharma (CA Final Fianance Executive) (111 Points)

07 February 2012

If Employee has taken an advance for Administrative Expenditure...... i.e For Hospitality of Guest.

Advance taken by employee 18000/- (in Cash)

But Actual Expenditure (for Hotel Stay) incurred is Rs 22000/-

Total AMount was paid by Employee in Cash.

Now Employee wants to settle the Advance, by providing Bill, can we pay remaining amount in Cash.

If yes, Will Sec 40 A (3) not affect this expenditure.???

Kindly Help...

Thanx in Advance.

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5 Replies

Suraj S (Audit Executive) (335 Points)
Replied 07 February 2012

Definitely this will not attract Sec 40 A (3) as it covers the expenses paid in a single day in excess of Rs.20,000.00. Also, we can have proper explanations regarding this if there is any question about this from IT Officer. So, the expense incurred thru employee advance is not covered by Sec 40 A(3).

Thanks......

Dintakurthi Tirumala (CA FINAL) (15989 Points)
Replied 07 February 2012

I agreed with the Suraj.

OM SAI SRI SAI JAI JAI SAI

Giridhar S Karandikar (Team Lead) (7543 Points)
Replied 12 February 2012

Section 40(A)3 will definitely get attracted. The section says if any of the payments or the aggregrate paymetns made on a single day excedds Rs20k then the disallowance is attracted. Now the employee while settlng the hotel bill makes a payment of Rs.22,000 on a single day to the hotel. So as the amt exceeds Rs.20k so the disallowance is attracted.

The settlling of the advance & the payment of excess expense is a different thing. That does not have any have any connection with attracting the disallowance.

Thouhg the employee is being given the advance of Rs 18000 the total exp incurred is Rs.22k, whihc the employee was required to pay to the hotel. So first paying the employee Rs.18k & then reimbursing him with the balance 4k does not have to do anything with non=attracting the disallowance.