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Cash & 20000

Rupesh Soni (Taxation Consultant & CA final student) (504 Points)

07 May 2014

if i made advance to supplier of Rs.100000/- to buy goods...Is it Disallowable u/40...As i paid >20000...Reply

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Deepak Gupta (CA Student) (15922 Points)
Replied 07 May 2014

Originally posted by : Rupesh Soni
	if i made advance to supplier of Rs.100000/- to buy goods...Is it Disallowable u/40...As i paid >20000...Reply (I think you mean to say u/s 40A(3), if payment made in cash)

u/s 40A(3), advance payments are also covered.
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Scope of the word 'expenditure' for the purpose of Sec. 40A(3):

Even if the payments were made by way of advances and were ultimately treated as discharging the liability to pay the price of the goods purchased, the payments so made must be considered to fall within the expression ‘expenditure’ incurred for payment of the price of the goods.
- Kejriwal Iron Stores v. CIT [1988] 169 ITR 12 (Raj.).
.
Therefore, it will be considered as payment made in violation of the provisions of section 40A(3) and no deduction shall be allowed.

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Swami Ayyappa Nuli (TAX ADVISOR & CONSULTANT AT G.S.T SUVIDHA CENTER) (1372 Points)
Replied 08 May 2014

Yes,He is correct.It will be disallowed if bill amount exceeds rs20000.So it is advisable to raise 5bill individually not exceeding rs20000 each so that you can make it allowable.Thank you.

sumit jain (Ca Final Student and Article) (71 Points)
Replied 08 May 2014

Raiae 5 different bills less than rs. 20000 in 5 different dates. If you raise 5 different bills less than rs. 20000 in same date it will still going to be disallowed under section 40A (3).