Disallowance u/s-40a(3)

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Querist : Anonymous

Querist : Anonymous (Querist)

13 February 2013 suppose a maufacturing co. on march 31, 1998, makes a provision for an outstanding bill of Rs. 80000 for purchase of raw material. on april 4, 2006, out of Rs. 80000, Rs 27000 is paid in cash. Will this payment in cash be disallowed U/S-40A(3)& in which year?

CA.Sourabh Sethia

CA.Sourabh Sethia (Expert)
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13 February 2013 since the payment is made in the next year it would be disallowed in the next year

As per Section - 40A(3A) Where an allowance has been made in the assessment for any year in respect of any liability incurred by the assessee for any expenditure and subsequently during any previous year (hereinafter referred to as subsequent year) the assessee makes payment in respect thereof, otherwise than by bank so made shall be deemed to be the profits and gains of business or profession and accordingly chargeable to income-tax as income of the subsequent year if the payment or aggregate of payments made to a person in a day, exceeds twenty thousand rupees:

CA Prashant Gupta

CA Prashant Gupta (Expert)
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13 February 2013 it will be disallowed in F.Y. 1998-99 (next year)
because 40A(3) is applicable on paid basis

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CA.Sourabh Sethia

CA.Sourabh Sethia (Expert)
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13 February 2013 by Next year I meant 2006 i.e the year of Payment
i want to correct CA Prashant sir its not the next year 1998-99 its 2006

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CA Prashant Gupta

CA Prashant Gupta (Expert)
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13 February 2013 ya, sorry for that
I thought it was paid in next year so I mentioned wrong year. if exp is paid in 2006 then it is disallowed in 2006
as i mentioned that 40A(3) is applicable on paid basis.

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CA.Sourabh Sethia

CA.Sourabh Sethia (Expert)
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15 February 2013 its ok
no need of Sorry sir.