Hi the company I am auditing is running contruction business. For meeting expendinture sometimes they deposit money into the suppiers/ clients bank account directly (above Rs 20,000). Will such expenditure come under 40(A)(3) and get disallowed or is it ok to continue so? Kindly reply...
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Money deposit above rs 20,000 to client's bank account ?
Replies (3)
YES IT WILL BE DISALLOWED AS PER 40(A)(3), IF CLIENT DOESNT FALL IN RULE 6DD
As per Section 40A(3) you have to pay an amount exceeding 20000 by way of a/c payee cheque or DD,
So direct deposit to client's account will be disallowed u/s 40A(3)..
As per my opinion your client should make book adjustments ie fund transfer from his bank a/c to supplier's bank a/c as it will be covered under exceptions to 40A(3)[ Rule 6DD].
Yes, I Agree with both Kunal and Nuba.
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