I recently came across a client, which is a private limited company which has paid lakhs of rupees as service tax in cash. Should such service tax be charged as an expense to profit and loss account? Also if charged as an expense would it be dissallowable as an expenditure under Sec 40A(3) of the Income Tax Act since all payments have been made in cash and exceed Rs. 20000?
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Service tax payments in cash exceeding rs. 20000 in value
Replies (1)
Dear Neharoks,
no, such kind of payment is not attracted for disallowance u/s 40A(3)... it's not the payment made to a single person (for expense).. but keep a check on the amount in excess of Rs. 10 lakh (CCR+cash payment) as above that amount, the assessee needs to make payment electroncially...
However, the payment in cash exceeding Rs. 20000 is allowable expense..
Best Regards,
CA Lovely Arora
ca.lovelyarora @ gmail.com
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