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40a(3)

Namitha Sebastian (article assistant) (102 Points)

19 November 2014

Whether advance paid for any purchase/ expenses exceeding Rs. 20000 will violate Section 40A(3)?

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12 Replies

umesh (Student CA Final ) (147 Points)
Replied 19 November 2014

yes it will violate...but there are some exceptions to purchase

refer the link....hope your query is solved

https://www.simpletaxindia.net/2009/12/payment-exceeding-20000-40a3-exceptions.H T M L

https://www.charteredclub.com/section-40a3/

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CA AnKiT BoHrA (AB) (Manager) (25955 Points)
Replied 19 November 2014

yes it will violate the section... Advance purchase expenses whatever it is .....

koundinya (stundent) (56 Points)
Replied 19 November 2014

Yes it is voilation if u make payment in cash

CA Ankit Verma (Associate Consultant) (262 Points)
Replied 19 November 2014

Yes.. Payment should not be in cash..

Rohit Kapoor (CA Final) (543 Points)
Replied 19 November 2014

Agreed wid all above

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Sankeet (accountant) (24 Points)
Replied 19 November 2014

Yes to same person same day for same activity. ...

prasad upadhayay (M.Com) (22 Points)
Replied 19 November 2014

whether payment to a single party in cash on same day, but i am in doubt

Ashok Timalsina (Student) (22 Points)
Replied 20 November 2014

yes it will violate.

dhaval ranpura (Last few months of CA Articleship) (22 Points)
Replied 20 November 2014

Can the transaction of advance payment be shown as a loan?

Hardik K. Haria (student) (44 Points)
Replied 20 November 2014

Yes it will violate the provision.

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Swami Ayyappa Nuli (TAX ADVISOR & CONSULTANT AT G.S.T SUVIDHA CENTER) (1372 Points)
Replied 20 November 2014

Yes, It will violate provisions u/s.40A(3). So amount paid as advance to party will be disallowed in the year in which you claim such expenses in profit and Loss account. It is not matter whether you paid amount for a single bill or for multiple bills and it is the matter whether aggregate amounts paid to a single person in a single day exceeds Rs.20,000. If you treat it as Unsecured Loan then there will be no problem to you but problem exists for receiver as it amounts to 269SS violation (Acceptance of Loan in cash in excess of Rs.20,000) which will leads to penalty equal to violation amount.