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Section 40 (A) (3)


CA SUNNY AGGARWAL (Tax Consultant)     03 April 2019

CA SUNNY AGGARWAL
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A company gives advance to its employees in their bank accounts in normal course of business as part of TA DA expenditures. Employees go on tours and spend money in cash for various payments more than 10000 eg. for hotel payment etc.
on returning from tour, company settle this advance amount with expenses of employees based on proofs.
Now question is - Whether this payment in cash by employees more than 10000 will attract provisions of section 40 A 3 and will cause disallowance of expenditure for the company.

kindly suggest.

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rama krishnan   03 April 2019

rama krishnan

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no... it'll not attract 40A (3) except when the company makes payments in cash to employees

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CA SUNNY AGGARWAL (Tax Consultant)     03 April 2019

CA SUNNY AGGARWAL
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Thanks for reply, but can you please share the relevant clause or explanation or any judgement for the same.

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rama krishnan   03 April 2019

rama krishnan

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as far as my opinion, there's no requirement for any reliance on any case laws bcoz your issue is straight and simple... company did not make payments in violation to 40A(3) ,it just reimburses the expenses incurred by its employees.. let's wait for experts suggestions too

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CA SUNNY AGGARWAL (Tax Consultant)     03 April 2019

CA SUNNY AGGARWAL
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Yes, I agree with your view. it is not in violation of 40(A)(3), but I have to prove this understanding to some relevant authority for which I need some written explanation or judgement.

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Giridhar S Karandikar (Team Lead)     03 April 2019

Giridhar S Karandikar
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co has given advance to employee by crediting their bank account. so as far as far co is concerned it has not violated 40(A)(3).
now employees have withdrawn cash from their personal bank accounts and expensed it. and they have also provided proofs of cash expensed.
so if at all your case comes up for any scrutiny you can explain the AO by providing the relevant extracts of bank statements

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