INADMISSABLE EXPENSES!!!!!!!!!!!!!!!!!!

This query is : Resolved

Report Abuse Follow Query Ask a Query

Sindhu

Sindhu (Querist)
Follow

11 October 2007 CAN THE PAYMENTS BE MADE TO THE EMPLOYEES ABOVE Rs.20,000/- IN CASH??? IS IT ALLOWABLE OR NOT?

CMA Gul S

CMA Gul S (Expert)
Follow

11 October 2007 It is not Allowable and Please do not make any payments in Cash it is advisable to pay by Crosed Cheque. Such Expense paid in Cash > 20K will be disallowed

Ravikumar.G

Ravikumar.G (Expert)
Follow

11 October 2007 You please also read 6DD rule for more and correct information.

Upgrade to CAclubindia Pro. Subscribe Now!

CMA Gul S

CMA Gul S (Expert)
Follow

12 October 2007 Mr Ravi is very Correct Thanks Ravi for the Supporting Provision

S.RAVICHANDRAN

S.RAVICHANDRAN (Expert)
Follow

12 October 2007 You have told cash payment of Rs.20000/. Assuming it as an expenditure which will be debited to Profit and Loss Account, Section 40 (A)3 is attracted and disalloance comes.

But if the payment is in the nature of Balance Sheet item say Salary advance or something like that, then 40(A)3 is not attracted. The word " Expenditure" needs special attention in your case.

Ravikumar.G

Ravikumar.G (Expert)
Follow

12 October 2007 One more doubt regarding these issues. If advance paid to staff as a balance sheet item aganist that reimbursement of expenses is coming out from that particular advance is exceeding Rs. 20000/- will it be an allowable expenditure mr.Ravichandran sir.

S.RAVICHANDRAN

S.RAVICHANDRAN (Expert)
Follow

12 October 2007 In accounting parlance, advance paid to a expenditure item, automatically falls under Balance Sheet category. So, though the salary is a expenditure item, the Advance paid on that salary is not an expenditure item ( my view).

So, in my opinion, salary advance is not a P & L item and hence do not attract 40 (A)3.

Hope Mr.Rao and Gul woudl endorse my view.