ONE MORE QUERY IN RESPECT OF SECTION 40A(3)

Tax queries 986 views 3 replies

CA Umashankar Vaishnav

Service in Cement Manufacturing Organiza

1069 Points Joined September 2007

RESPECTED SIR ,

MAY I HAVE ONE QUERY IN RESPECT OF INCOME TAX “ PROFIT & GAIN OF BUSINESS AND PROFESSION “ . IN IT UNDER SECTION 40(A) (3) IF ANY EXPENSES ( PAYMENT) BY MEANS OF CASH PAYMENT( EXCEPT BY AN ACCOUNT PAYYEE CHEQUE OR AN ACCOUNT PAYEE BANK DRAFT) EXCEED RS. 20000 /-

THEN SUCH EXPENSES MAY BE 100% DISALLOWED AND NOT DEDUCTIBLE.

[ AMENDMENT IN FINANCE BILL 2008]

[ UPTO THE FINANCE BILL 2006 IT MAY BE ONLY 20% DIS-ALLOWED]

NOW , FOR A BUILDERS ( AN ASSESSE ) POINT OF VIEW LAND BEINGS ITS STOCK IN TRADE . IF IT MAKE A CASH PAYMENT IN A PREVIOUS YEAR 2008-09 ( ASSESSMENT YEAR 2009-10) FOR REGISTRY OF LAND TO A REGISTRAR OF RS . 65000.00 . THEN IT BEING A REVENUE EXPENDITURE AND IT REFLACT SECTION 40A(3).

SO, PLEASE TELL ME THAT WHETHER SUCH EXPENDITURE ARE TO BE ALLOWED AS DEDUTIBLE EXPENDITURE OR NOT . UNDER THE INCOME TAX ACT 1961.

Replies (3)

krishna iyer

Sr.Finance Manager

197 Points Joined February 2009

Please refer rule 6DD of IT Rules. There u can find exceptional cases, where cash payments in excess of Rs.20000/- is allowed.

payment to Govt in cash is allowed . The rules say"

where the payment is made to the Govt., and, under the rules framed by it, such payment is required to be made in legal tender . If Govt will accept cash only towards regn fees, then there will not be any disallowances. Pl retain challan/ack issued by Govt dept., & attach with Return.,

Narayan paudel

FINAL

205 Points Joined October 2007

Actually sec 40 A (3) came in to force jus to stop the fake payments,, assessee used to show so much expenses in cash as it is not traceable by it authorities... So to stop such things tis section came in to force,,,,..

and there is provision in income tax regarding payment of cash to local authorities or goverments... Such exp is a deductable exxpendi as there is proof of facts..

CA Sakshi

CA Practice

309 Points Joined December 2008

I agree with what Mr. Iyer said. Payment to government offices may be made in cash exceeding 20000/-. But in insurance expenses this point is not considered- keep this in mind.