Section 40a(3)

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

15 August 2013 Examine the applicability of the provisions of section 40A(3) in the following cases:
(i) Riyan purchases goods in cash from his brother for 40,000, whose market value is 35,000.
(ii) Riyan purchases a building for 10,00,000 and makes the payment in cash.
(iii) Riyan makes a purchase of goods of 60,000 and makes payment of 45,000 by account payee cheque and 15,000 in cash.

CA Siddhartha Bhardwaj

CA Siddhartha Bhardwaj (Expert)
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16 August 2013 (i) Section 40A(3) is NOT applicable. Section 40A(2) is applicable in this case.

(ii) Section 40A(3) is NOT applicable. Section 40A(3) is applicable when payment is made for an expense which is allowed as deduction under the Income Tax Act. Purchase of building is NOT allowed as deduction since it is a capital expenditure.
Section 40A(3) is NOT applicable.

(iii) Section 40A(3) is NOT applicable since the cash payment is only for Rs. 16,000 which is less than Rs. 20,000

Querist : Anonymous

Querist : Anonymous (Querist)

17 August 2013 Sir, thanks a lot..

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CA Siddhartha Bhardwaj

CA Siddhartha Bhardwaj (Expert)
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17 August 2013 You are welcome. You should use the thanks button to convey your thanks.