urgent sec-40 (3)

This query is : Resolved

Mayank (Querist)
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26 September 2010 hiiiii friends

i want to ask that if we have received an advance in excess of Rs.20000 in cash and due to cancellation of order can we return money this advance money in cash or through chq.

kindly rply soon.

byeeee

CA. Prashanth Kumar Jain

CA. Prashanth Kumar Jain (Expert)
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26 September 2010 since it is not claimed as expense it can be refunded either mode

CA E.A.Ravikumar

CA E.A.Ravikumar (Expert)
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26 September 2010 It is better to return the money through account payee cheque. The amount received assumes the character of "loan" immediately upon cancellation of the order. Unless there is a compelling reason which can be accepted as a reasonable cause, it is better to return through permitted modes rather than giving 269T a chance to play a role.

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CA. Praveen Narayan

CA. Praveen Narayan (Expert)
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26 September 2010 Sec 40A (3) disallowanc applicabl only when any payment in respect of any expenditure is made otherwise than by a/c payee cheque.

Section 40A(3)(a) of the Income-tax Act, 1961 provides that any expenditure incurred in respect of which payment is made in a sum exceeding Rs.20,000/- otherwise than by an account payee cheque drawn on a bank or by an account payee bank draft, shall not be allowed as a deduction.

Since ur payment is nt in respect of any exp., no disallowanc ll b attracted.

Repayment of loan/ advanc is not an expenditure..

Hope u r clear..

Mayank

Mayank (Querist)
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28 September 2010 Thanx to all of you