Cash deposited in other party's bank a/c directly

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CA Shrey Tripathi (Querist)
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08 January 2014 If Cash is deposited in other party's bank A/C directly as payment towards some expenditure ,which is exceeding Rs. 20,000/-, whether such an expenditure would be disallowed or not?

Thanks in Advance.

CA DHEERAJ

CA DHEERAJ (Expert)
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08 January 2014 yes
such expenditure is disallowed

because in section 40A(3) is not mention cash deposit in direct bank account of party and not mention under rule 6DD

Section 40A(3) shall be attracted if the following conditions are fulfilled
- assessee incurs any expenditure
- in respect of which payment or aggregate of payments made
- to a person
- in a single day
- of a sum exceeding rs. 20000
- otherwise than by a account payee cheque or account payee demand draft

crux of 40A(3): 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 chque drawn on a bank or accout payee bank draft, exceeds rs. 20000, no deduction shall be allowed in respect of such expenditure