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Payment exceeding 20000/-

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Samir

Accounting and taxation outsou

275 Points Posted on 23 July 2007

Hi,

My client is wholesale dealer in red chilly. They purchase RED CHILLY from farmer on sale or return basis. when they make the payment the same is made in CASH and amount paid is excess of 20000/-.In this case does it gets covered under section 40A(3 ) and 20% are disallowed. I think payment made to farmers in excess of 20000/- are allowed. Could you please let me know the correct solution.

Replies (5)

Prakash Chandra Verma

31 Points Posted on 24 July 2007

Yes. You are right. Rule 6DD provides that payment to a cultivatore,grower,producer for purchases of agricultural, do not attract sec 40A(3).

Samir

Accounting and taxation outsou

275 Points Posted on 24 July 2007

Hi, Is there any proffneeds to maintained to ensure that the payment is made to farmer?

M.Sriram Shenoy

CA Final

658 Points Posted on 14 February 2008

Dont worry Mr.Sameer. Read rule 6DD, which lays out exceptions to Sec.40A(3) as your case doesnot fall under 40A(3).

Srinivas Sharma KN

Tax Consultant

175 Points Posted on 15 February 2008

Prakash and Sriram are correct. As regards maintaining proof, they have to maintain payment voucher with supplier signature. This is not only for income tax purpose but also for future reference, if there is any dispute between you client and the supplier.