Cash payment exceeding rs 20000/-

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

11 November 2013
WE NEED TO PAY RS 60000/-(SIXTY THOUSAND ONLY) TO AN EMPLOYEE AS AN ADVANCE PAYMENT AGAINST AN EXPENDITURE TO BE MADE AFTER 10 DAYS.

THE EMPLOYEE SUBMITTED BILLS AND ADJUSTED ADVANCE OF RS 60000/-. THE BILLS SUBMITTED ARE BELOW RS 20000/- AND A NUMBER OF BILLS.

CAN YOU ADVISE WHETHER FIRST OF ALL THE ADVANCE PAYMENT IS MORE THAT RS 20000/- EXCEEDING THE LIMIT WILL ATTRACT DISALLOWANCE UNDER SEC 40(A) OF IT ACT.

Guest

Guest (Expert)

11 November 2013 First of all, Advance is not an expenditure and hence can not be claimed as expenditure.

Next thing, As per section 40(A)(3), incurred towards an expenditure on single day to single person for more than Rs 20000.

Here payment to employee is not expense but payment made by employee to others in expense.

And moreover employee made payments to different persons on different dates and below rs 20000

Hence no 40(A)(3)

Regards
CA Ashish Barthwal

Nikhil Kaushik

Nikhil Kaushik (Expert)
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11 November 2013 Agreed to Ashish to a large extent.

However it would be advisable to take cautious approach. in several cases cash advances (later adjusted against expense were disallowed):

Please refer to the following judgments wherein advances (for revenue expenditure) were disallowed:

Kejriwal Iron Stores v. CIT [1988] 169 ITR 12 (Raj.)

Nathalal Jethalal.vs Commissioner Of Income Tax. 99 ITR 757

Vijay Kumar Ajit Kumar. vs Commissioner Of Income Tax. 191 ITR 391

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