Controversy about advance transaction

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darshit (Querist)
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20 November 2010 A businessman had a proprietary concern. He does business on small scale basis. He receives cash of Rs. 1,00,000 as an advance for a particular transaction.

As transaction could not be materialised for 2 months, the businessman paid back Rs. 1,00,000 as cash immediately on next date.

My question is :

(A) Whether one can take advance of Rs. 1,00,000 as cash against goods?

(B) Whether one can return advance of Rs. 1,00,000 in cash?

B R Ramesh

B R Ramesh (Expert)
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20 November 2010 Hi

U/s sec 40A of income tax act payments exceeds Rs.20000 paid to a person as expenditure or advance.

the same expenditure will be dis allowed & the entire amt to be taxed @ 30% in the hands of the provider.

hence it is not advisable to receive a cash