40A(3) disallowance

effect of 40 (A3) won't be applicable since the said amount is less than rs 20000

Present limit is rs 10000

@ Ashwin - consider my question with regard to AY 2018-19 in which case limit is Rs.10,000.

Section 40A(3) of IT Act:

Where the assessee incurs any expenditure in respect of which a payment or aggregate of payments made to a person in a day, otherwise than by an account-payee cheque drawn on a bank or account-payee bank draft, exceeds Rs. 10,000 (Rs. 35,000 where payment is made for plying, leasing or hiring goods carriages), no deduction shall be allowed in respect of such expenditure.

Where payment is made for plying, hiring or leasing goods carriages, the payment shall have to be made by account-payee cheque or account-payee draft if the amount of payment exceeds Rs. 35,000 instead of Rs. 10,000 applicable in all other cases.

@ Dhirajlal : sir, reply in the given context. My question is what if the payment is made by a partner in cash out of his personal money... And partner's account is credited in books to that extent.

I have given the text of the act......... so that can be modified to your requirement.

Otherwise, Mr. Ashwini Kumar has already replied.......... it will be disallowed.....

current provision is cash transaction limit is 20000 ...the limit of 10000 is proposed one....am i right dhirajlal sir ? correct me if I am wrong

It was proposed in the finance bill, 2017.

When the bill was passed by parliament without change, particularly for this amendment, it became act.

So the limit of Rs.10,000/- became applicable u/s. 40A(3) from AY 2018-19.

But for students..... Finance bill 2017, is not included in Nov. 2017 exams. So, the old limit of 20,000/- is still valid for exam purpose.

thank u sir

Rs. 10000 limit is applicable from AY 2018-19

That means, it is applicable to FY 2017-18

All reasons mentioned above for attracting disallowance is wrong. There wont be any disallowance because the sum of 11000 is being paid by the partner in his personal capacity. Please note an expenditure will be disallowed only if the assessee pays in cash more than the limit of 10K and not by any one else. The query is very much clear that the partner's account is adjusted to that extent which simply means a journal entry is passed i.e Carriage exp Dr  to Partner Cap A/c. 

This entry has not resulted in outflow of money from the assessee i.e firm. Where is the question of disallowance?

@ Ashok sir - sir only you understand my query properly. But if you are right people can misuse the law right... the intention of section 40A(3) goes may fail...

Act says that "Where the assessee incurs any expenditure in respect of which a payment or aggregate of payments made to a person in a day, otherwise than by an account-payee cheque drawn on a bank or account-payee bank draft, exceeds Rs.10000 no deduction shall be allowed in respect of such expenditure."

Act is using the words "other than" cheque or draft.
The word cash is not mentioned
that means expenses are disallowed, because they are in a mode other than a/c payee cheque or a/c payee draft.
And, if the firm reimburses the

...reimburses the expenses to partner, then it is allowed.
But amount is more than 10000 so disallowed.