I have come across a situation which doing tax audit of a client where the opening outstanding amount of creditors is more than 1 lac and he has made payment in various installments of 15000/- on different dates in cash. Is this way is correct or same could be disallowed.Please clarify.
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Query regarding section 40a(3) under rule 6dd
Replies (3)
It is an allowable expenditure. Sec 40A(3) shall be attracted if all the following conditions are fulfilled and if any 1 condition is not fulfilled, then 40A(3) is not attracted:
- Assessee incurs any expenditure
- In respect of which payment or aggregate payments made
- To a person
- In a single day
- Of a sum exceeding Rs 20000/-
- Otherwise than by an account payee cheque or account payee DD
Hence in your case, cash is paid on different dates. Therefore Sec 40A(3) is not attracted
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