Cash payment Sec. 40 A
This query is : Resolved
11 February 2011
What are the limits for making cash payments for expenses in FY 2010-11. This would be applicable for purchase of Raw Material or not?
Let me explain:-
Assume party doing business in fruit purchase & sale. They pay 10 Lacs to a party for the purchase of fruits in local market in cash. In this case 40 A(3) applicable? This payment dissallowed?
What are the limits for making cash payments for expenses in FY 2010-11. This would be applicable for purchase of Raw Material or not?
Let me explain:-
Assume party doing business in fruit purchase & sale. They pay 10 Lacs to a party for the purchase of fruits in local market in cash. In this case 40 A(3) applicable? This payment dissallowed?
11 February 2011
Since purchase of raw material is a direct expenditure and is allowed as a deduction under Income Tax Act,limit under section 40A(3) is applicable to that
11 February 2011
Let me explain:-
Assume party doing business in fruit purchase & sale. They pay 10 Lacs to a party for the purchase of fruits in local market in cash. In this case 40 A(3) applicable? This payment dissallowed?
Assume party doing business in fruit purchase & sale. They pay 10 Lacs to a party for the purchase of fruits in local market in cash. In this case 40 A(3) applicable? This payment dissallowed?
12 February 2011
Hi
I Slightly Disagree with Expert Mr.Kumar
Sec 40A(3)
Normal Business Expenditure = Rs. 20000/-
Payment made for plying, hiring or leasing goods carriages = Rs. 35000/-
Though its a business expenditure, Rule 6DD read with Notification No: 97/2008 dated 10/10/2008 needs to be analysed in detail.
Rule 6DD & Notification
It says among other things
"payments made to agricultural or forest, or produce of Animal Husbandry, or Dairy or Poultry or Fish or Fish Products, or products of Horticulture, Apiculture , to a CULTIVATOR, GROWER, PRODUCER OF SUCH PRODUCTS"
SUMMARY
If the payments is made to "CULTIVATOR, GROWER, PRODUCER OF SUCH PRODUCTS" then Sec 40A(3) may not be applicable & there will not be any Disallowance.
However if the Payments are made to local market Vendors who are NOT "CULTIVATOR, GROWER, PRODUCER OF SUCH PRODUCTS" then
Sec 40A(3) may be attracted & therefore Disawllowance.
Hope i have resolved the issue,
For further clarifactions, pls Join my Community "Lo Aca" & feel free to post any issues. Will answer to the best of my abilities.
THANK YOU
Regards
CA. LOHITH. J
B.Com,ACA,CS,(ICWA),SAPM Hons,ITF Hons
I Slightly Disagree with Expert Mr.Kumar
Sec 40A(3)
Normal Business Expenditure = Rs. 20000/-
Payment made for plying, hiring or leasing goods carriages = Rs. 35000/-
Though its a business expenditure, Rule 6DD read with Notification No: 97/2008 dated 10/10/2008 needs to be analysed in detail.
Rule 6DD & Notification
It says among other things
"payments made to agricultural or forest, or produce of Animal Husbandry, or Dairy or Poultry or Fish or Fish Products, or products of Horticulture, Apiculture , to a CULTIVATOR, GROWER, PRODUCER OF SUCH PRODUCTS"
SUMMARY
If the payments is made to "CULTIVATOR, GROWER, PRODUCER OF SUCH PRODUCTS" then Sec 40A(3) may not be applicable & there will not be any Disallowance.
However if the Payments are made to local market Vendors who are NOT "CULTIVATOR, GROWER, PRODUCER OF SUCH PRODUCTS" then
Sec 40A(3) may be attracted & therefore Disawllowance.
Hope i have resolved the issue,
For further clarifactions, pls Join my Community "Lo Aca" & feel free to post any issues. Will answer to the best of my abilities.
THANK YOU
Regards
CA. LOHITH. J
B.Com,ACA,CS,(ICWA),SAPM Hons,ITF Hons
14 February 2011
yeah u r right Mr. lohith. thnx
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