Section 40A(3) IT Act

Yes it is covered u/s 40 A(3) and it is disallowed under the computation of income tax

Delivery is not relevant at all.Any payment for expenditure exceeding Rs 20000 is disallowed.

Originally posted by : santhosh
	Delivery is not relevant at all.Any payment for expenditure exceeding Rs 20000 is disallowed.

Section 40A(3) is related to payment and as the payment is  more than Rs. 20,000. It will be disallowed.

It will be disallowed.

I got my answer partially...let reframe it...if i paid an advance against any capital goods say Rs 30000(other than account payee cheque or draft) and i also paid an advance Rs 35000(other than account payee cheque or draft) for supplying of raw material...in that case both should be disallowed...i guess no....so my question is if I advance some money for future  delivery of goods wiil be disallowed...coz there are cases where some parties ask for 30% or 20% in advance while making purchase order...so if that portion of advance crosses Rs 20000 should it get disallowed? 

Section 40A(3) doesnt apply to capital goods. As on capital goods depreciation is charged.

According to me you are talking if suppose there is a bill of Rs. 1,00,000 and we paid Rs. 30,000 in cash and Rs. 40,000 and Rs. 30,000 by cheque. In such a case Rs. 30,000 will be disallowed.

this section is not apply on purchase of capital goods..

any payment which is expences as per P&L a/c  are covered in this section...

Hi Ayan... you have a good question here.

I guess you mean to simply ask that whether or not we should consider Advance for expenditure as Expenditure itself..

Advance cannot be the same as expenditure itself... but going by the intention of the statute to curb cash dealings (and hence money laundering)... advance for revenue expenditure should be treated as expenditure itself for 40A(3)

Dear paul,

Firstly let me clarify that section 40A(3) of the Income Tax Act, 1961 provides for disallowance where the assessee incurs any expenditure in respect of which the payment or aggregate of payments made to a person in a day exceeds Rs.20000 (subject to Rule 6DD of the Income Tax Rules, 1962). Question of disallowance will only come when it is debited to P&L a/c, so generally this provision will not apply for purchase of fixed asset. However the income tax offcier may take a view that it will apply to depreciation on the fixed asset......In connection with purchase of raw material, there is no doubt and amt paid as advance will get disallowed....

Regards

Kanti jain 

capital expenditure above Rs. 20000/- will be allowed

but revenue expenditure above Rs. 20000/- will not be allowed as it is covered u/s 40A(3) of Income Tax Act, 1961........

Since both the exp and payment exceeds 20000,it is disallowed u/s 40(A)(3)

Dear Friends

Payment made above 20,000 in a day in cash ot otherwise than by an account payee cheque drawn on a bank or account payee bank draft in the cases and circumstances specified hereunder, namely is disallowed only

'The main part of the Rule earlier read as,No disallowance under clause (a) of sub-section (3) of section 40A shall be made and no payment shall be deemed to be the profits and gains of business or profession under clause (b) of sub-section (3) of section 40A where any payment in a sum exceeding twenty thousand rupees is made otherwise than by an account payee cheque drawn on a bank or account payee bank draft in the cases and circumstances specified hereunder, namely'

Regards

Delivery is not important. 'Money', if is paid otherwise than a acount payee cheque, would attract 40A(3). However these must be read with Rule 6dd which deal with exceptional cases which included exceptions for purchase too.

Originally posted by : Amitkk
	Hi Ayan... you have a good question here. I guess you mean to simply ask that whether or not we should consider Advance for expenditure as Expenditure itself.. Advance cannot be the same as expenditure itself... but going by the intention of the statute to curb cash dealings (and hence money laundering)... advance for revenue expenditure should be treated as expenditure itself for 40A(3)

Yes you got my answer correct..those two were just example to ask...i know that Capital goods are allowed....but doubt was in my mind about the advance for revenue expenditure in cash exceeding 20000....now its cleared..thanx all for sharing ur views...thats the power of a forum..