Sec 40(3) Payment to Same Person But Against Different Bill

@ RONIT:

Pls refer to the ACT as mentioned by Sanjay rana..... You misunderstood it...

agree with manoj..

Dear Sneha ji , manoj ji and kamal ji please have a look at this,

i cant refer u any case because i don't think it is that much complicated as u are making please go through this 

• Section 40A(3)(a) of the Income-tax Act, 1961 provides that any expenditure incurred in respect of which payment is made in a sum exceeding Rs.20,000/- otherwise than by an account payee cheque drawn on a bank or by an account payee bank draft, shall not be allowed as a deduction.
  
• Section 40A(3)(b) also provides for deeming a payment as profits and gains of business or profession if the expenditure is incurred in a particular year but the payment is made in any subsequent year in a sum exceeding Rs. 20,000/- otherwise than by an account payee cheque or by an account payee bank draft.
  
• The provisions of this section are subject to exceptions as provided in Rule 6DD of the Income-tax Rules, 1962.
• Section 40A(3) is an anti tax-evasion measure. By requiring payments to be made by an account payee instrument, it is possible to verify the genuineness of the transaction thereby mitigating the risk of evasion.
  
• Person are splitting a particular high value payment to a person into several cash payments, each below Rs.20,000/-. This splitting is also resorted to for payments made in the course of a single day.
  
• Courts have also held that the statutory limit in section 40A(3) applies to payment made to a party at one time and not to the aggregate of the payments made to a party in the course of the day as recorded in the cash book.
  
• According to the judicial opinion, the words used are ‘in a sum’, i.e., single sum.Therefore, irrespective of any number of transactions, where the amount does not exceed the prescribed amount in each transaction,the rigours of section 40A(3) will not apply.
  

To overcome the splitting of payments to the same person made during a day as referred above and to increase the efficacy of the provision, the amendment seeks to substitute the present provision to provide that where a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, exceeds twenty thousand rupees, the disallowance of such expenditure shall be made under the proposed sub-section (3) of section 40A or the payment shall be deemed to be the profits and gains of business or profession under the proposed sub-section (3A) of section 40A,as the case may be.

• To illustrate with an example, let us assume a taxpayer has incurred an expenditure of Rs 40,000/-. The taxpayer makes separate payments of Rs 15,000/-, Rs 16,000/- and Rs 9,000/- all by cash, to the person concerned in a single day. The aggregate amount of payment made to a person in a day, in this case, is Rs 40,000/-. Since, the aggregate payment by cash exceeds Rs 20,000/-,Rs. 40,000/- will not be allowed as a deduction in computing the total income of the taxpayer in accordance with the proposed amendment.

The proviso to the proposed sub-section (3A) provides that in certain prescribed cases and circumstances the provisions of proposed sub-sections (3) and (3A) shall not apply.
This amendment will take effect from 1st April, 2009 and will accordingly apply in relation to assessment year 2009-10 and subsequent assessment years.

source

https://www.simpletaxindia.org/2008/03/budget-changes-missed-by-u-40a3-cash.html

hope now u will understand :)

and thanks shivang for supporting me :)

if i am wrong please rectify me guyssss m still at learning stage and i know ambiguity and interpretation goes side by side in Income tax :)

Sanju

Sanjay..

Act is perfect as mentioned by you...

40(A)(3) is not Applicable looking to the nature of the business...

Pls refer to the DTC 09/10....

4. 30(2) Payments to small transport
operators, or drivers, towards
freight should be covered under
Rule 6DD and exempt from the
provisions of section 40A(3)

Clause 16 – Amendment of section
40A(3)
Transport operators would be now
permitted to made cash payments of up to
Rs.35,000 in respect of any expenditure,
without attracting disallowance, as against
the general limit of Rs.20,000 in section
40A(3).

Source: https://www.icai.org/resource_file/16757sugg_dtax.pdf

sorry i made a flaw........thx for guiding me sanjay rana and shivang

Hey its ok.. never to be sorry..... with discussion everyone will learn....even those who just read to the posts....

Right Shivang ..still long way to go.....sometimes discussion clears concepts better than reading the same thing again and again :)

Agreed with Sanjay Singh,

When i looked at this topic, i immediately came to the conclusion that 40A(3) is applicable.. but when i looked at other posts... i got confused and again had a look at the section..

Anil Ji, The payment made to a single person and total sum was Rs. 50,000 (Rs. 10000*5). This will attract Section 40A(3) due to the wording of the section reproduced below

Where the assessee incurs any expenditure in respect of which a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, exceeds twenty thousand rupees, no deduction shall be allowed in respect of such expenditure.

Provided further that in the case of payment made for plying, hiring or leasing goods carriages, the provisions of sub-sections (3) and (3A) shall have effect as if for the words “twenty thousand rupees”, the words “thirty-five thousand rupees” had been substituted.

you are advised to split the payment in two or three days either showing advance to transporter or outstanding payment in later days.

Dear Dinesh,

Pls read all the post. there is exception for this business.

dear friend

it is not applicable in case of payment against different bills but every payment must not exceed rs. 20000 before october 09 and rs.35000 on or after oct.09 whether the aggregrate of payment exceeds rs. 20000 or rs. 35000 in a day as the case may be.

regards

tarun rustagi