Cash payments

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

16 February 2013 If i made payments to 2nd party more than 20000 by depositing cash in his bank Account.....Then is it allowed as For deduction

CA AYUSH AGRAWAL

CA AYUSH AGRAWAL (Expert)
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16 February 2013 Still This Issue is Contradictory.
Many a Time This Issue Has Been Discussed Here Only.
But A Conclusion Which I Reached is:-

Its wont Attract Section 40 A 3.
some other views are also there, that it will attract.

Querist : Anonymous

Querist : Anonymous (Querist)

16 February 2013 40A iii ?????

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Querist : Anonymous

Querist : Anonymous (Querist)

16 February 2013 40A iii??????

Karan Teli

Karan Teli (Expert)
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16 February 2013 When we go and deposit the cash in others account which exceeds the 20,000/- limit then the same is disallowed in the act. It is deemed that cash is paid to him since banker just acts as custodian of funds on behalf of the customer.

CA.ViVeK M ACA

CA.ViVeK M ACA (Expert)
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16 February 2013 Act specicially and clearly mentioned about Crossed cheque and draft and depositing cash is not deemed to be or equivalent to crossed cheque or draft and as such it will be disallowd

CA AYUSH AGRAWAL

CA AYUSH AGRAWAL (Expert)
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16 February 2013 I Already Told That This Case Still Can be Understand as Contradictory part:-

You Pls Rfere The Case:-

Bangalore Tribunal in Sri Renukeswara Rice Mills Vs Income-Tax Officer (reported in 93 ITD 263 - 278 ITR 77)

Where It Was Held That It is Allowable.

But in case of:-
K Abdu & Co. ..
In That It Was Held That Its Disallowed.

CA AYUSH AGRAWAL

CA AYUSH AGRAWAL (Expert)
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16 February 2013 Bangalore Tribunal in Sri Renukeswara Rice Mills Vs Income-Tax Officer (reported in 93 ITD 263 - 278 ITR 77)?

In this case, the assessee, for the purpose of purchase of rice, paid the amount directly to the bank account of the payee. The Tribunal held as follows: "The effect of issue of crossed cheque/DD is that the payee named therein receives the payment through banking channels. The purpose is dual. In the first instance it is to see that the payee and payee alone, receives the payment and to ensure that the payment is routed through bank channel so as to trace the origin and conclusion of the transaction. In the case before us, it is seen that instead of issuing cheque/DD the assessee prepared a challan and along with the cash the challan was presented to the bank of the payee for the credit of the same in the account of payee. In the result it is ensured that the payee and payee alone, receives the payment and the origin and conclusion of transaction is traceable. Thus payment of sum directly in the bank account of payee fulfils the criteria for ensuring the object of introduction of Section 40A(3). This is not a direct payment to the payee but only to the credit of this bank account without the payee actually receiving the cash. We accordingly hold that such payment is not in violation of provision of Section 40A(3) and hence no disallowance is called for."

I find that apart from the above, the fact that the payment was made for purchasing agricultural commodity also contributed to the decision in favour of the assessee. The Tribunal observed "Clause (f) of Rule 6DD provides that where the payment is made for the purchase of agricultural produce to the cultivator, Section 40A(3) will not apply. Similarly, Clause (1) of Rule 6 DD provides that where the payment is made by any person to his agent who is required to make payment in cash for goods, Section 40A(3) will not apply. Since the assessee has paid the sum to his agent who is the payee in the present case, and who in his turn is required to make payment to the cultivator, indirectly, the assessee has paid for the purchase of agricultural produce to the cultivator through the agent. Thus, a combined reading of Clauses (f) and (1) of Rule 6DD will take away the transaction from the clutches of Section 40A(3)."

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CA AYUSH AGRAWAL

CA AYUSH AGRAWAL (Expert)
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16 February 2013 And As Per My Understanding :-
It Should Be Allowed.
I Will Prefer Renukeswara Rice Mill Case.

Bringing This Section Motive Behind Was:-

to Route up Amount Through Banking Channel...
and is There...

CA AYUSH AGRAWAL

CA AYUSH AGRAWAL (Expert)
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16 February 2013 The whole purpose of Sec 40A(3) is to break the mechanism of traill less transsactions, & this transactions has very much established the trail what was required.

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Querist : Anonymous

Querist : Anonymous (Querist)

18 February 2013 thanks to all experts