I am working in a construction company. In our working site, our workers met an accident and we bring them for hospitalization. In that occassion, for medical treatment we have paid cash which more than Rs.20,000.( Other than no option available) but which is against the section 40A(3). Noew kindly give me a solution how can i debit that amount in our Cash book and moreover confirm that the above said situation is exceptional. Pls urgent
22 September 2008
Hi Naren Pl let me know whether you have paid this to the workmen or to the hospital & whether the hospital is not willing to accept cheque.
You can always this in your staff welfare account. Ensure that you account this in your books of accounts. There cannot be a case where the company spends but does not account.
on the tax allowability, 40A(3)has to be read along with rule 6DD which lists cases and circumstances in which payment in a sum exceeding twenty thousand rupees may be made otherwise than by a crossed cheque drawn on a bank or by a crossed bank draft. The objects of the provision is to curb flow of black money and not to put an impediment over the trade and business.
In Girdharilal goenka vs CIT, it was pronounced that the ITO should take a practical approach to problems and strike a balance between the direction of law and hardship to the assessee. He should not enmesh himself in technicalities. After all, the object is not to deprive the assessee of the deduction which he is otherwise entitled to claim.
Your tax auditor can make an appropriate note and this can be explained to the authorities.
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