urgebt query sec 40a 3

Making payment in two different dates, each payment below 20000,  is the only solution

Dont forget that the case is under scrutiny and the books were closed earlier. in such a case the assessee may got penalized for altering the books of accounts? What is your opinion those who are advicing to split the amounts below 20,000/- ? Is this possible if the books of transporter and the assessee are closed?

This might help if you can prove the following to the AO which is allowed as per rule 6DD

1.If the payment is being made in a village / town & there is no bank in that village or
town on the date of making the payment & further payment is being made to a person
who has Business / Profession at that place or the person ordinarily resides at that
place.
2 If the payment is being made on a day when the banks are closed due to strike or
otherwise.
·

Or Split the bills of Payment as kabirsen said but the amount is quite large

1.What if the AO verifies our so called split payments with the books of Transporter?

its better to split the bills of payment ... or just prove that the transporter dont have bank facilities ... usually transporteres will not be maintaining proper books of accounts.. so there will not be much risky like the ao' s comes and checking of the books i think..

Ol dos who r of opinion of splitting of bills should note that d books r olready closed and d r under scrutiny so alteration in d books is not possible....

I had given d opinion is d only way out fr dis situation....

 thnx for d discussion frends..i dnt think Ao will agree on any of these points...

The proviso to section 40A(3) runs as under:

Provided that no disallowance shall be made and no payment shall be deemed to be the profits and gains of the business or profession under sub-section 3 where a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft exceeds 20,000 rupees, in such cases and under such circumstances as may be prescribed (Rule 6DD), having  regard  to  the  nature and  extent  of  banking  facilities available,  considerations  of  business  expediency  and  other relevant factors.

Provided further than in the case of payment made for plying, hiring or leasing goods carriages, the provisions of sub-section 3 shall have effect as if for the words 20,000 rupees, the words 35,000/- had been substituted (w.e.f. 01 10 2009).

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Rules 6DD(g) provides as under:

where the payment is made in a village or town, which on the date of such payment is not served by bany bank, to any person who ordinarily resides, or is carrying on any business, profession or vocatin any such village or town;

Rules 6DD(k) provides as under:

where the payment is made by any person to his agent (other than employee) who is required to make payment in cash for goods or services on behalf of such peerson;

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From the facts of the case; it seems that every time transporter renders services to different unknown people. Other factors  are that drivers are illiterate persons not knowing how to operate bank accounts and if cheques are given; they are not in a position to first deposit these at unknown places where banking facilities are not available. And except driver; nobody is there to represent the truck owner. Practically; in most of the cases; they unload goods at factory premises of the receipient where no such banking facilities are available.  The drivers cannot wait after goods are unloaded.  They immediately leave the place and load goods of other parties as per the instructions of the master.  The situations are also not in control of their master.  In some cases; they convey the position of booking of goods to the master and accordingly go away for next destination. 

As per wording of the section; having  regard  to  the  nature and  extent  of  banking  facilities available,  considerations  of  business  expediency  and  OTHER RELEVANT FACTORS.

 it is not so difficult to prove to the AO about the business needs.

So you can "satisfy" the AO with above contention.

CA Surendra Rakhecha

Surat

In addition to "considerations of business expediency and OTHER RELEVANT FACTORS" as mentioned in the previous reply, "Sunday Payments" "Payments on holidays" shall definitely be outside the purview of Sec.40A(3). Therefore first ascertain the days of payment first. Look for holidays in the net. This may help to come out without difficulty atleast in case of some of the payments.

if AO has already caught it then its not possible now to do anything.if AO has not caught it then ask transporter for help, may be he'll give new bills. even if he replaces bills then keep in mind the amount already filed with income tax authority in TDS return,. And limit has been amended to 35000 only for transporter by finance act 2009... 

sec.40A(3)  is not applicable only in some special circumstances specified in rule 6DD of income tax act 1961& that are following:

1. if there is no facilities of banks

2.paymanet was made on holidays of bank .in above case these two reasons may be applied by you .