40A(3)

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vipin (Querist)
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02 December 2009 A company makes payment in cash to employees as following:
75 employee *1500 each=112500/-
on the occasion of DIWALI.
Now co. makes payment by a single voucher and a list of employee is there with voucher.
Please tell me whether sec. 40A(3) is applicable since payment is more than 20000/-.

Zeeshan

Zeeshan (Expert)
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02 December 2009 dear vipin first go through the plain text of section 4oA(3) which is as follows:

Where the assessee incurs "any expenditure" in respect of which 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, no deduction shall be allowed in respect of such expenditure.

look here two important conditions are:
1. one expediture
2. a person

in your case payment is being made to various persons and individual payment is less than 20000/- hence section 40A(3) is not applicable in this case.