Rs.500000 received from debtor in cash
This query is : Resolved
17 December 2011
is their any problem if the company receives from debtor rs.500000 payemtns in cash.
17 December 2011
In section 40A of the Income-tax Act, for sub-section (3), the following subsections shall be substituted with effect from the 1st day of April, 2009, namely:-
“(3) Where the assessee incurs any expenditure in respect of which 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 twenty thousand rupees, no deduction shall be Allowed in respect of such expenditure.
(3A) Where an allowance has been made in the assessment for any year in respect of any liability incurred by the assessee for any expenditure and subsequently during any previous year hereinafter referred to as subsequent year) the assessee makes payment in respect thereof, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, the payment so made shall be deemed to be the profits and gains of business or profession and accordingly chargeable to income-tax as income of the subsequent year if the payment or aggregate of payments made to a person in a day, exceeds twenty thousand rupees:
Section 40A (3) is an anti tax-evasion measure. By requiring payments to be made by an account payee instrument, it is possible to verify the genuineness of the transaction thereby mitigating the risk of evasion.
So in case the company receives Rs.500000 in cash from the debtor then the whole sum will be disallowed in the case of the debtor itself and there is no issue for the company to receive such sum in cash. So there is no problem in receiving such amount.
CA. Richi Saxena
“(3) Where the assessee incurs any expenditure in respect of which 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 twenty thousand rupees, no deduction shall be Allowed in respect of such expenditure.
(3A) Where an allowance has been made in the assessment for any year in respect of any liability incurred by the assessee for any expenditure and subsequently during any previous year hereinafter referred to as subsequent year) the assessee makes payment in respect thereof, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, the payment so made shall be deemed to be the profits and gains of business or profession and accordingly chargeable to income-tax as income of the subsequent year if the payment or aggregate of payments made to a person in a day, exceeds twenty thousand rupees:
Section 40A (3) is an anti tax-evasion measure. By requiring payments to be made by an account payee instrument, it is possible to verify the genuineness of the transaction thereby mitigating the risk of evasion.
So in case the company receives Rs.500000 in cash from the debtor then the whole sum will be disallowed in the case of the debtor itself and there is no issue for the company to receive such sum in cash. So there is no problem in receiving such amount.
CA. Richi Saxena
Guest
Guest
(Expert)
17 December 2011
On the saver side, obtain confirmation of account from the debtor so that you are able to prove genuineness of such debtor at the time of scrutiny when due to unavoidable circumstances whereabouts of debtors could not be found out.
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