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Sec 40A(3) ..... again

Archit Jain (Practicing CA) (93 Points)

08 February 2009  

we all know that the given section was amended in the finance act 2008. Earlier a single payment in cash to a party cannot exceed Rs. 20000 in a day otherwise the same will be dissallowed to the extent of 20%. the act got this sec. amended as - the aggregate of payments made to a single party in a day against any exp. in excess of Rs. 20000 will be dissallowd. Now the problem is- a client of ours argue that this provision is just for a single bill . it means that if he recieves 2 bills from a party both of Rs. 20000 n he makes the payment of both on the same day in cash then it will be allowed n hence the provisions of the section will not be attracted. How could this be if the amendment is so clear.......???? plzz help n confirm that the client is wrong or either i am wrong....


 2 Replies

Kiran Kumar V (C.A. Final) (181 Points)
Replied 08 February 2009

Hello Mr.Archit,

You are right, aggregate amount of multiple payments in a single day to a person otherwise than by crossed cheque or crossed D.D. exceeds Rs.20000 then, it will attract Sec 40A(3) of the IT Act.

Subsequently entire amount wlil be disallowed.

But there are some exceptions to Sec 40A(3), please read with Rule 6DD of IT Act.

Then you will get complet knowledge regarding Sec 40A(3).

With Best Regards,

Kiran Kumar V

Archit Jain (Practicing CA) (93 Points)
Replied 09 February 2009

i have read that but n have figured out that .... as per me it is dissallowed... just wanted to confirm... thxxx

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