12 October 2007
IF YOU HAVE EXHAUSTED THE EXCEPTIONS UNDER RULE 6DD,THERE IS NOTHING PRIMA FACIE WRONG IF WE CREDIT EMPLOYEES ACCOUNT AND SETTLE THE CREDIT BY PART PAYMENTS, IF EMPLOYYES CAN WAIT TO RECEIVE PIECE MEAL PAYMENTS. BUT THE BOTTOMLINE IS A WARNING THAT SUCH CONTINUOUS PRACTICES IF ANY NOTICED BY ASSESSING OFFICER IN SCRUTINY MAY LAND THE ASSESSEE IN TROUBLE. HOWEVER YOU MAY EXPLORE IF EMPLOYEES CAN GET EACH DIFFERENT BILL FOR BELOW RS. 20000, TO SOLVE YOUR PROBLEM. 40A (3) IS NOT ATTRACTED IF A SINGLE PAYMENT ABOVE RS. 20000 IS SETTLED PARTLY IN CASH AND BALANCE IN CHEQUE IF THE CASH ALONE DOES NOT EXCEED RS. 20000. 40A(3) does not apply when we dont claim a deduction under any sec between 30 to 37 like say donation etc... after disallowences under other sections like say SEC 40 A(2),only on the balance amount (if it exceeds RS. 20000,then only) DISALLOWANCE AS PER 40A(3) WILL TAKE PLACE. R.V.RAO
to be specific to your question, how can that be tracked. you would maintain the books with payment to the same person 2-3 times in cash during the financial year and that also would not be under the head Salary or any admissible Expenses.
Also i would agree with Mr Rao's statement that the employee would not wait long for the full settlement and looking into you accouts it would easily be tracked
CAclubindia
