08 July 2023
Sir, If I pay rs. 10 lakh to a farmer to purchase agriculture produce in a day. Is it allowed? Will the purchase be disallowed as expense or not.
08 July 2023
Certain exceptions provided in rule 6DD, under which expenditure, even exceeding Rs. 20,000/Rs. 35,000 shall be allowed as deduction, even though the payment or aggregate of payments made to a person in a day is not made by an account payee cheque/draft. These exceptions are as follows-
a) Where the payment is made to- i. The Reserve Bank of India or any banking company; ii. The State Bank of India or any subsidiary bank; iii. Any co-operative bank or land mortgage bank; iv. Any primary agricultural credit society or any primary credit society; v. The Life Insurance Corporation of India;
b) Where the payment is made to the Government and, under the rules framed by it, such payment is required to be made in a legal tender;
c) Where the payment is made by:- i. any letter of credit arrangement through a bank; ii. a mail or telegraphic transfer through a bank; iii. a book adjustment from any account in a bank to any other account in that or any other bank; iv. a bill of exchange made payable only to a bank; v. the use of electronic clearing system through a bank account; vi. a credit card; vii. a debit card.
d) Where the payment is made by way of adjustment against the amount of any liability incurred by the payee for any goods supplied or services rendered by the assessee to such payee;
e) Where the payment is made for the purchase of- i. agricultural or forest produce; or ii. the produce of animal husbandry (including livestock, meat, hides and skins) or dairy or poultry farming; or iii. fish or fish products; or iv. the product of horticulture or apiculture, to the cultivator, grower or producer of such articles, produce or products;
f) Where the payment is made for the purchase of products manufactured or processed without the aid of power in a cottage industry, to the producer of such products;
g) Where the payment is made in a village or town, which on the date of such payment is not served by any bank, to any person who ordinarily resides, or is carrying on any business, profession or vocation, in any such village or town;
h) Where any payment is made to an employee of the assessee or the hire of any such employee, or in connection with the retirement, retrenchment, resignation, discharge or death of such employee, on account of gratuity, retrenchment compensation or similar terminal benefit and the aggregate of such sums payable to the employee or his heirs does not exceed fifty thousand rupees;
i) Where the payment is made by an assessee by way of salary to his employee after deducting the income-tax from salary in accordance with the provisions of Sec. 192 of the Act, and when such employee- i. is temporarily posted for a continuous period of fifteen days or more in place other than his normal place of duty or on a ship; and ii. does not maintain any account in bank at such place or ship;
j) Where the payment is required to be made on a day on which the banks are closed either on account of holiday or strike;
k) Where the payment is made by any person to his agent who is required to make payment in cash for goods or services on behalf of such person;
l) Where the payment is made by an authorized dealer or a money changer against purchase of foreign currency or travelers cheques in the normal course of his business.
So, considering exemption under rule 6DD sub sec. e(i), the expense cannot be disallowed.
08 July 2023
CA Seetharaman ji I really dont care about the cultivator, he is ready to accept cash, Will I be in trouble or not for giving cash for purchasing agriculture produce to a farmer.
08 July 2023
CA R Seetharaman ji, please clarify, the exception of the payment of cash above Rs. 2lakh is coverd in 6DD for the assessee, and 269ST is applicable on "Farmer" for accepting cash. SO, here the assessee comes clean? Only the farmer is liable for the penalty. Please clarify.
08 July 2023
Yes, you are right the exception of the payment of cash above Rs. 2lakh is coverd in 6DD for the assessee, and 269ST is applicable on "Farmer" for accepting cash.
CAclubindia
