23 January 2011
Dear experts please advise whether electricity bill paid by cash is allowable under section 40A(3) towards payment made in excess of Rs. 20000/-
24 January 2011
The payment is technically covered by the provision of Sec. 40A(3) and would prima-facie attract a dis-allowance. However though the existence of the section has been constitutionally held to be valid by the Hon. Supreme Court in the case of Attar Sing Gurmukh Singh Vs. ITO 191 ITR 667, the same was considered along with the Rule 6DD as it existed then which duly provided for the genuine hardship that may be caused to the tax payers. The intention of the provision was to curb the use of black money, reduce tax evasion and inculcate the banking habits. However it was never intended right from the inception of this section, read with the rule and circulars issued explaining the reason for such provision, to restrict the trading activities of the assessee or the tax payer.
Based on the principles of Natural Justice and the Interpretation of Law the disallowance cannot be justified if the payee is identifiable and the payment is genuine only because the payment was done in cash if the circumstances existing can be validly shown, despite there being no sub-clause for genuine hardships any more in the Rule 6DD.
24 January 2011
As per strict reading of the provision of section 40A(3), any payment madein cash exceeding an amount Rs.20,000 to the same party in a day, then such transaction will be covered by section 40A(3)& accordingly will be disallowed. Again Rule 6DD does not spesifically provide for the exeption of such transaction from the provision of section40A(3). However Assessing Officer has discreationary power to allow or disallow the transaction after being check the genuineness of the transaction , hence if you explain the nature, party & genuineness of the transaction to A.O. then he may allow you for the same.
Guest
Guest
(Expert)
24 January 2011
Materially, I agree with Mr. Sachin but in my opinion, there is no discreationary power to A.O.
25 January 2011
Payment made in excess of Rs. 20000 for electricity bill in cash will be allowable and not impacted by section 40A(3). It comes under one of the conditions laid down in rule 6DD.
Guest
Guest
(Expert)
25 January 2011
Will you please let me know the respective clause or sub-rule of Rule 6DD
Guest
Guest
(Expert)
25 January 2011
Dear Patani Ji, Will you please let me know the respective clause or sub-rule of Rule 6DD
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