A Company is in the business of purchasing land , plotting and selling it. But it purchasing land in cash on regular basis. Total Cash purchase of Land is of Rs 2 crores. On single day it has paid lakhs of Rupees to different seller of land Whether Sec 40A(3) will be applicable here. Is any case law is there for the above situation.
08 September 2011
as assessee is engaged in business of purchase and sale of land so it is revenue expenditure and covered u/s 37. provisions under Sec 40A(3) are applicable to these payments. So it is disallowed.
08 September 2011
as the assessee is engaged in land business, so the land is defined under "stock in trade" for him, hence the payment may be disallowed.
for every such incident, he has to procure the evidences that payment had to be made other than banking chanels, depending on the circumstances.
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