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Sec 40A(3)

N V Ram (Manager) (272 Points)

19 July 2010  

Cash used to take DD in excess of  Rs 20K,the same debited to expense. Will it get disallowed u/s 40A(3) ?


 10 Replies

CA Manikandan Raghunath ( ) (609 Points)
Replied 19 July 2010

As per Section 40A(3), Where the assessee incurs any expenditure in respect of which payment is made in a sum exceeding twenty thousand rupees otherwise than by an account payee cheque drawn on a bank or account payee bank draft, no deduction shall be allowed in respect of such expenditure.

 

Hence as per the above provision only the ultimate payment to the party need to be considered. Since the payment has been made by way of a Demand Draft, the same will not be disallowed as expenditure.

 

Also the purpose of Section 40A(3) is that there should not be any huge cash payment which will escape the tax liability.  .

 

Hence in your case, the cash paid to take the DD is a valid expenditure nd hence will not get disallowed

 

Regards

 

M R M

Harpreet (* * * * * *) (1660 Points)
Replied 19 July 2010

it will not get disallowed u/s 40a(3) bcoz u have paid the same by DD and debited into p & l a/c. it will only disallowed if the following circumstances will occured:

Rule 6 d Of The Income Tax Rules Rule Deals With, Cases and circumstances in which a payment or aggregate of payments exceeding twenty thousand rupees may be made by a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft

Read more: https://www.taxguru.in/income-tax/income-tax-payment-of-more-than-rs-20000-amendement-in-rule-6d-of-the-income-tax-rules.html#ixzz0u6QpXL21
 

Somshekar (Rankholder) (-) (158 Points)
Replied 19 July 2010

not diasallowed

ashish kedia (student) (31 Points)
Replied 19 July 2010

it shall not be disallowed u/s 40A(3)

ashish kedia (student) (31 Points)
Replied 19 July 2010

it shall not be disallowed u/s 40A(3)


(Guest)
Originally posted by : Harpreet

it will not get disallowed u/s 40a(3) bcoz u have paid the same by DD and debited into p & l a/c. it will only disallowed if the following circumstances will occured:

Rule 6 d Of The Income Tax Rules Rule Deals With, Cases and circumstances in which a payment or aggregate of payments exceeding twenty thousand rupees may be made by a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft. 

Read more: https://www.taxguru.in/income-tax/income-tax-payment-of-more-than-rs-20000-amendement-in-rule-6d-of-the-income-tax-rules.html#ixzz0u6QpXL21
 

Himanshu (Article Trainee) (97 Points)
Replied 19 July 2010

Ya,

The ultimate payment to thirdparty will be co\nsidered hence in this case it will not be disallowed u/s 40A(3).

CA LOVELY ARORA (C.A. B.Com (H) Graduate)   (2141 Points)
Replied 19 July 2010

allowed........

Abhimanyu Bind (CA Final Student & Audit Assitant)   (2049 Points)
Replied 19 July 2010

No not at all. It will not be disallowed...

CA Seema Kochar (CHARTERED ACCOUNTANT) (636 Points)
Replied 20 July 2010

it is allowed as expenses......


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