Sec 40 A (3)

This query is : Resolved

ABDUL AZEEZ.T.K (Querist)
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22 September 2009 Sir

My Client , he is doing Agricultural Business( Supari). He is Buying Supari from both Registered Dealers and Unregistered dealers. In both cases he is Paying in cash bases only to the parties in the last past years.( because the dealers want immediate cash at the time of purchase( cheque will take delay), some registered dealers have only Sale Tax registration but no Bank operation ) . Now assessment came for PY 06.07 AY 07-08, the AO is telling he is not allowed, the cash payment to Registered Dealers for more than Rs: 20000/- under sec 40 A (3).
My client he is withdrawing cash from the Bank by self cheque and giving by way of cash to the dealers (most of the payments are more than Rs 100000.00/-).

I request you to give correct information related with this matters and give judiciary case laws related with this matter

CA SANJAY MUKHERJEE

CA SANJAY MUKHERJEE (Expert)
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22 September 2009 Dear Abdul,

The A.O is correct if the supplier are not the primary grower/culivator. but since the product is supari you can have a look at Rule 6DD(e)and if you can find/prove that your cliient is purchasing directly from the grower then only you /he can take the advantage of Rule 6DD(e)and can avoid disallowance under sec 40A(3). sales tax /vat registration is not relevent for income tax assessment.

Thanks

sanjay