17 September 2013
If you purchase goods for cash exceeding Rs 20000 it will be disallowed and the addition will be made.
No disallowance will be made in such a case where the goods are capital goods since no deduction of capital goods is taken from the Profits of the assessee.
17 September 2013
are you sure Aryan? because our client has made cash payment of Rs. 4,30,000 for purchase.... is there any case law or cicular or notification in this regard??
The act is clear on this disallowance? Just answer this question, IS PURCHASE AN EXPENSE? If the answer is yes, then payment for more than Rs 20000 in cash would attract disallowance unless the case is covered under the proviso thereto.
17 September 2013
once aain thanks Nikhil. But after few minutes after asking question one case law comes to my notice which says it is disallowed and purchase also falls within the ambit of section 40A(3). Plz check the following case law.
Relevant case law : Attar Singh Gurmukh Singh (supreme court)
The assessees in these appeals have made payments in cash exceeding a sum of Rs. 2,500 for some of the purchases of stock-in-trade. The payments are not allowed as deductions in the computation of income under the head "Profits and gains of business". The payments are held to be in contravention of the terms of section 40A(3) of the Income-tax Act, 1961, read with rule 6DD of the Income-tax Rules, 1962. The assessees have appealed to this court challenging the disallowance.
Two questions arise for consideration in these appeals : (i) the validity of section 40A(3) of the Act; and (ii) the applicability of Section 40A(3) to payments made for acquiring stock-in-trade.
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