Section 40 a 3

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Querist : Anonymous

Querist : Anonymous (Querist)

07 May 2015 When a payment is made above 20,000/- in cash for paying advance to a vendor who supplies raw material, is it disallowed?

CA AnKiT BoHrA (AB)

CA AnKiT BoHrA (AB) (Expert)
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07 May 2015 YES IT IS DISALLOWED DEAR.....!!!!

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Querist : Anonymous

Querist : Anonymous (Querist)

07 May 2015 In my case:

1.Advance of Rs.39000/- against the bill no 123; dated 1-6-14 paid in two vouchers - Rs.19500/- on 1-6-14 & Rs.19500/- on 2-6-14.

2.Advance of Rs.39000/- against the bill no 124; dated 2-6-14 paid in two vouchers - Rs.19500/- on 2-6-14 & Rs.19500/- on 3-6-14.

Now the total advance paid on 2-6-14 comes to 39,000/- but against two different bills. Is it disallowed?

CA AnKiT BoHrA (AB)

CA AnKiT BoHrA (AB) (Expert)
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07 May 2015 To overcome the splitting of payments (as given above) to the same person made during a day as referred above and to increase the efficacy of the provision, an amendment was made through Finance act 2008 and after 01.04.2008, where 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, the disallowance of such expenditure shall be made under the proposed sub-section (3) of section 40A or the payment shall be deemed to be the profits and gains of business or profession under the proposed sub-section (3A) of section 40A,as the case may be.

CA AnKiT BoHrA (AB)

CA AnKiT BoHrA (AB) (Expert)
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07 May 2015 so it wil b disallowed because payment made to same person in a single day crossing the limits

https://www.simpletaxindia.net/2009/12/payment-exceeding-20000-40a3-exceptions.html

Querist : Anonymous

Querist : Anonymous (Querist)

07 May 2015 in the above eg shared by me:

the amounts are paid to a transporter but since the amount is paid for freight incurred while purchasing raw material, the cost of freight is added to the cost of RM & freight charges are not accounted seperately. Indirectly, amount is paid for RM. So i need to consider 20000/- or 35000/-??

Plz let me know

Aashok Kumar Sharma online

Aashok Kumar Sharma online

(Expert)
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23 July 2025 https://docs.google.com/document/d/1SXVJRPZSzGyc1n5sTJipWwjRNyfdWDupwEWJPYlnRWE/edit?usp=sharing

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