Sec 40A(3)

If an enterprise pays Rs. 15,000/- pertaining to a particular expense and also pays Rs. 16,000/- pertaining to some other expense (both in cash) on a single day and to a same party then will this expense be allowed or disallowed u/s 40A(3)??

 

Replies (112)

If payments are made against separate bill then sec 40A(3) shall not apply.

Disallowed....... total payment to the party on a day will be considered from FY 2008-09. In 2007-08 it would not have been disallowed. So disallow 31,000/-

Originally posted by :G.K..
" Disallowed....... total payment to the party on a day will be considered from FY 2008-09. In 2007-08 it would not have been disallowed. So disallow 31,000/- "

yes, it is fully disallowed.

 Yup... fully disallowed

Dear Dipika and Hareesh,

If the assessee makes payment of two different bills (none of them exceed Rs.20,000) at the same time in cash, sec 40A(3) is not applicable even if the aggregate payment is more than Rs.20,000.

 

This is because of the fact that sec 40A(3) is applicable only in respect of an "EXPENDITURE" wwhich is in excess of Rs.20,000.

 

In other words,unless the amount of the bill and amount of payment in cash exceeds Rs.20,000,sec 40A(3) is not applicable.

 Dear Fatema the section says where the assesse incurs any expenditure in respect of which payment made to a person in a day..

 If your following an assmnt yr 09 10 or 10 11 book for ur PCC u can check it out i guess....

Hareesh,

The section also says that if the payee is paid on the same day against two different bills which individually do not exceed Rs.20,000 then sec 40A(3) is not applicable and the expenditure is allowed.

for applicability of sec 40A(3)there must be payment in excess of rs 20000 (i)in cash (ii)in a same day , (iii)to same party as well as against (iv)single expenditure (Bill). since in this case payment made to same person, same day but not against single exp. hence there will be no disallowance

expenditure are allowed if their is seprate bill for each exp.

 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.

This is the wordings of the act...

Hareesh,

You are correct.These are the exact wordings of the act. You forgot to highlight the words "in respect of such expenditure".

 Here the single expenditure does not exceed Rs. 20,000,Hence it is allowable.

I totally agree wih Hareesh.the word 'aggregate of payments' proves  d point.

 Yup then wats the significance of aggregate of payments words for...

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