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Sec 40A(3)

CA Trinath Galla (student) (3130 Points)

19 January 2011

Will disallowance under section 40A(3) will be attracted in the following case?

Mr.X purchases sum materail three times in a day from Mr.Y. (say 0on 19/01/2011)

Y gave thre bills of 18,000 , 15,000 and 15,000.

X makes the payment to all the three bills on same day.

Will it be disallowed as the total amount exceeded 20,000 / not disallowed as the individual expenditure does not exceed 20000.

different buks gave different opinions.

please share ur views.

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39 Replies

Pankaj Arora (Learner) (3134 Points)
Replied 19 January 2011

I think in this case expenditure will not disallowed because payment of each bill did not cross 20000/- and cash payment given on same day for different bills hence it will be allowed as an expenditure.

CA Pawan Lakhotia (Infosys Limited) (202 Points)
Replied 19 January 2011

SEC 40A(3) read as under " where in respect of Exp. for which payment is made exceds Rs.20000/-"""

that menas both Exp and Payment should exceeds Rs.20000/- in your case since bill amount is less than Rs.20000/- payment can be made .it will not be disallowed

you may also read above section from ACT and interpert Accordingly

Thanks

rachit jain (chartered accountant ) (635 Points)
Replied 19 January 2011

As per the recent amendement the definition is " where an assessee incure any expenditure for which, payment or aggregate of payment is made to a person in a day is in excess of Rs.20000 in cash the whole of such expenditure shall not be allowed as a deduction".

so based on above definition the whole amount of Rs. 48000 will be disallowed.

5 Like

Manish Dokwal (STUDENT) (59 Points)
Replied 19 January 2011

Agreed with Rachet.......it will be disallowed....!!!!

Vidhya (111 Points)
Replied 19 January 2011

S 40A 3 "incurs any expenditure for which payment or aggregate of payment is made to a person in a day is in excess of Rs.20000"in cash the whole of such expenditure will not be allowed as a deduction

Nilesh Jain (Assistant Manager) (1064 Points)
Replied 19 January 2011

payment or aggregate of payment made to a person in a day in excess of Rs.20000 is dsallowed u/s 40A(3)..

CA Akshay Kumar Mishra (Chartered Accountant ) (1784 Points)
Replied 19 January 2011

yes, it will be dsallowed u/s 40A(3).. as the aggregate of cash payment made in a day exceeds Rs20000

siri (CFO) (174 Points)
Replied 19 January 2011

IN UR CASE IF U SEE , SCOPE OF SEC.40A(3):-

IF AN ASSESSEE MAKES PAYMENT OF 2 DIFFERENT BILLS(NONE OF THEM EXCEEDS Rs.20,000)/- AT THE SAME TIME IN CASH OR BY BEARER CHQ. SEC.40A(3) IS NOT APPLICABLE EVEN IF THE AGGREGATE PAY. IS MORE THAN RS. 20,000. THIS IS BCAZ OF THE FACT THAT SEC.40A(3) IS APPLICABLE ONLY IN RESPECT OF THE BILL AND THE AMOUNT OF AN EXP. WHICH IS IN EXCESS OF RS. 20,000. IN OTHER WORDS UNLESS THE AMT OF THE BILL AND THE AMT OF PAYMENT EXCEED RS.20,000 SEC.40A(3) IS NOT APPLICABLE..

SO SEC.40A(3) IS NOT APPLICABLE IN UR CASE....

SIRI.

preethi (student) (253 Points)
Replied 19 January 2011

Where the assessee incurs any expenditure in respect of which payment or aggregate of payments by cash made to a person in a day exceeds 20000 is disallowed u/s40a(3).

CA MAULIK (C.A) (937 Points)
Replied 19 January 2011

disallowed totally.......................

Jyoti Priya (student cs executive) (38 Points)
Replied 19 January 2011

Hello sir,

In my opinion the provisions of sec.40A(3) does not attaches to the problem as the individual payment in cash does not exceed Rs.20000. And hences, the expenditure so made is allowed as deduction.

Thanks.

CA Saba Naaz (Chartered Accountant) (8487 Points)
Replied 19 January 2011

Originally posted by : pankaj
	I think in this case expenditure will not be disallowed because payment of each bill did not cross 20000/- and cash payment given on same day for different bills hence it will be allowed as an expenditure.