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Very urgent

manik (ca in practice) (420 Points)

08 August 2011

our's is construction co. , we have many contractors working for us and on some of the sites the contractors are common. as per the company policy ,payments are given to contractors in cash on 7th of every month at each site separately. my question is there are cases in which similar contractor is receiving payment in cash at different sites for respective work done on that site . will it will attract dis-allowance u/s 40A (3)? what is the remedy for it?

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10 Replies

sumeet (Audit assitant) (37 Points)
Replied 08 August 2011

i think NO.

as its payment made to single person for different work...if a C.A who gets payment in cash of Rs15000 for audit fees and Rs6000 for incometax refund matter on the same day i.e total amounting to Rs21000 then 40a3 would not b attracted....nature of contract is to be seen..i.e billing is for all different site in bill or different bill for different site.

its according to me...

Jigar A. Thakkar (Chartered Accountant) (99 Points)
Replied 08 August 2011

Rule-

One Person-One Employer-Apply Limit

CA lakshmikanth (Chartered Accountant) (238 Points)
Replied 09 August 2011

Yes its attracts u/s 40A(3) Even payment is made different sites cash payment above 20000 made single person in one day because income tax attracts company as a whole not on construction wise

sumeet (Audit assitant) (37 Points)
Replied 09 August 2011

hey manik..sorry i have answered wrong. .it was my worng interpretation..i evn conveyed my seniors n also read the rule and amendments again...

here i modify my answer...it would attract 40A(3) as it is aggregate payment to single person on a single day for any expenditure..the only remedy is you should make payment on different days below 20000rs..

CA. Vikas Sharma (Chartered Acountant) (93 Points)
Replied 09 August 2011

Yes it attracts disallowance u/s 40A(3).

neelisetty murali krishna (CA(FINAL), CS FINAL) (38 Points)
Replied 09 August 2011

it attaracts diallwoance u/s 40a(3)

(Guest)

Originally posted by : CA. Vikas Sharma
	Yes it attracts disallowance u/s 40A(3).

Manivarma (Management) (21 Points)
Replied 10 August 2011

Payment made to different voucher for single contractor will not attract 40A (3)

CA PARAS BAFNA (Practising CA ) (33423 Points)
Replied 17 August 2011

Originally posted by : sumeet
	hey manik..sorry i have answered wrong. .it was my worng interpretation..i evn conveyed my seniors n also read the rule and amendments again... here i modify my answer...it would attract 40A(3) as it is aggregate payment to single person on a single day for any expenditure..the only remedy is you should make payment on different days below 20000rs..

I think , the interpretation can be considered by Sumeet in the following way-

"aggregate payment to single person on a single day for any expenditure".

Here any expenditure sounds like an expenditure and it is not like many expenditures.

Means... for any... ( for one) ... expenditure ....

in a single day to a single person cash can be paid within the prescribed limit.

When each bill is separate for each site and every bill is less than 20000/- 40A(3) will not apply.

In my view, he was right in his earlier reply.