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accounting of cash exceeding rs. 20000

JANKI (STUDENT) (280 Points)

16 July 2009

In one of the company, many payments are made exceeding rs. 20000 against the same bill. Is there any way by which such entries can be changed so that the disallowance u/s. 40A (3) is not attracted.

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12 Replies

Pratik K (Student) (3406 Points)
Replied 16 July 2009

I do not think that there is any escaping way.

the company need to pay via cheeque or dd or net transfer etc but not in cash.

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NAGESWARA RAO ABBIREDDI (Sr.Accountant) (43 Points)
Replied 16 July 2009

It is no way to escape under disallowance section 40A(3). my suggestion, at least in future also do not repeat this type of mistakes

Hussain (Chartered Accountant) (25 Points)
Replied 17 July 2009

when a person makes various payments at different times during a day to the same person and each of such payment is below 20000,sectionn 40A(3) is not applicable,even if the aggregate of the such payments exceed 20,000,no disallowances can be made under this section.Refer case SLP.143ITR 63 (SC),ALOO SUPPLY CO.121 ITR 680(ORI)

Hussain

Pratik K (Student) (3406 Points)
Replied 17 July 2009

But Hussain,

Janki herself said that "In one of the company, many payments are made exceeding rs. 20000 against the same bill."

that means here the said case can not be applicable.

Correct me if I am wrong

JANKI (STUDENT) (280 Points)
Replied 17 July 2009

I know some ways out i.e. by making payment on public holidays or making payments via agent appointed, but i was looking for some other way out.

I hope now i have made myself more clear & you will bw able to answer my query.

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chaitali (INCOME TAX PRACTISE) (25 Points)
Replied 17 July 2009

hey friends,

If we are making advance payment in cash for some services say suppose transport service and its above Rs.20000. and then afterwards final bil come nd balance payment has been made thn how 40A(3) will apply.

Ritesh (CA Final) (326 Points)
Replied 20 July 2009

Mr. Hussain

That case used to hold good prior to amendment made by Finance Act 2008 where sec 40A(3) got amended to provide that even if payments are made in a day at different times for a particular expenditure & aggregate of that payments exceed Rs. 20,000.Even in that scenario the expenditure would get disallowed....This amendment was bought just to nullify abovesaid judgement.This amendment was effective from F.Y 2008-09.

One thing which has to be remember now is that Sec. 40A(3) has been further amended by Finance Act 2009, where it has been provided that Rs. 20,000 will be substituted by Rs. 35000 w.r.t payment made to Transport operators engaged in the Business of Plying, Leasing and Hiring good carriages. For all other payments, Rs. 20,000 limit still applies. This further amendment is applicabe either from 1st april 2009 or 1st October 2009.....I am not so sure.....Do check it from the Budget....

1 Like

ajit sinha (CA) (51 Points)
Replied 23 July 2009

Dear Janki

you can handel this entire situation very tactfully the cash 1st you show 10000/- in advance and then put the invoice and after that pay the rest balance .

and you have to prove that the nature of payment is as per the circumstances of business.

with regard

Ajit

CA Hardik (Profession) (92 Points)
Replied 24 July 2009

Friends,

There is way of escaping from Sec 40A(3)

As per the rule 6DD , if the payment is required to be made on bank holiday Sec 40A(3) is not applicable

that is a payment can exceed Rs 20,000 in cash if made on bank holiday .

ajit sinha (CA) (51 Points)
Replied 24 July 2009

Dear Hattrick

you are absolutly right but the question of janki is "many payment are made that mean intensly or the requirement of business persist"

ajit

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Ratan Deep Saxena (Asstt Manager (Accounts & Finance)) (2998 Points)
Replied 25 July 2009

Payment of bills should be made in part in order to avoid any difficulty.

Anil Kumar (Sr. Accountant ) (33 Points)
Replied 26 July 2009

As far as I know, if there payments are made against capital expenditure i.e. purchase of plant and machiner, assets. Then the Sec. 40A(3) is not applicable. Determine any such nature of payment ?

Anil Kumar, Triburg