Cash Payments exceeding Rs. 20,000 U/s. 40(A)(3)

This query is : Resolved

V S A PRASAD (Querist)
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23 February 2008 M/s.XYZ of Vizag buys goods from M/s.ABC Ltd of Chennai.
Can M/s. XYZ deposit cash in the bank account of M/s. ABC directly ?
Will the above cash payment attracts the provsions of Section 40(A)(3) of the Income tax Act?
Plase clarify.

PRASAD

MANAS ROUT

MANAS ROUT (Expert)
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23 February 2008 yes.

CA Saurabh Maheshwari

CA Saurabh Maheshwari (Expert)
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23 February 2008 YES, ONLY PAYMENT THROUGH ACCOUNT PAYEE CHEQUE /ACCOUNT PAYEE DEMAND DRAFT SHALL BE ALLOWED FOR PAYMENT EXCEEDING RS.20000/-.DEPOSITING OF CASH DIRECTLY TO SUPPLIER ACCOUNT WILL ATTRACT THE PROVISIONS OF SEC 40(A)(3) AND TOTAL AMOUNT SHALL BE DISALLOWED

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Late CA Sampat Jain

Late CA Sampat Jain (Expert)
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24 February 2008 rule 6dd exempts following only:

(d) where the payment is made by—

(i) any letter of credit arrangements 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.

Explanation : For the purposes of this clause and clause (h), the term “bank” means any bank, banking company or society referred to in sub-clauses (i) to (iv) of clause (a) and includes any bank [not being a banking company54 as defined in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949)], whether incorporated or not, which is established outside India ;