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Cash expenditure above rs.20000

navinkumar naicker (Article) (419 Points)

25 July 2012

Hi Caclubindia,

Being on an audit duty i came across a transaction where the client has made an payment of Rs.30000 in cash to a party and reason he stated is that he has been wrongly credited by Rs.30000 by some unknown person & after knowing this he returned the same in cash will this transaction attracts Sec 40(A)3 provisions?

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CA Amit Jaiswal (Finance Manager) (2720 Points)
Replied 25 July 2012

The party must have debited some expense for the amount of Rs. 30000/-.

this expense will be disallowed.

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Devendra Singh (Chartered Accountant) (487 Points)
Replied 26 July 2012

the above case will not attract section 40(A)(3), but it might attract section 269 SS and section 269 TT, here are the complete provisions:

Section 269SS

No Person shall, take or accept from any other person (herein after called “depositor)any loans or deposits otherwise than by an account payee cheque or account payee draft if:-

(a)    The amount of such loan or the aggregate amount of such loan and deposit, is Rs.20,000/- or more, or

(b)   On the date of taking or accepting such loan or deposit, any loan or deposit accepted earlier by such person from the depositor is remaining unpaid is Rs.20,000/- or more

(c)    The aggregate of the amount of loan or deposit to be taken and the amount of loan or deposit taken earlier which is outstanding on the date on which loan or deposit is to be taken is Rs.20,000/- or more.

The provisions of this section shall not apply to any loan or deposit taken or accepted from or any loan or deposit taken or accepted by,

(i)                  Government

(ii)                Any banking company, post office saving bank or cooperative bank

(iii)               Any corporation established by a central, state or provincial act.

(iv)              Any government company

Provided further that provisions of this section shall not apply to any loan or deposit where the person from whom the loan or deposit is taken or accepted and the person by whom the loan or deposit is taken or accepted are both having agricultural income and none of them has any income chargeable to tax under the income tax act.

Analysis

This section gets applicable in following situation as per clause a, b and c

    Where a person accepts a two cash loan and/or deposit of Rs.10,000 each from a single person
    Where a person has taken a loan of Rs.20,000 by cheque and he wants to take another loan from the same person, say for Rs.3000.
    Where a person has taken a loan of Rs.14000 by cheque and he wants to take further a loan of Rs.6000 or 8000

The second proviso to this section shall not be applicable in case the either lender or borrower have any income other than agriculture income i.e. if either lender or borrower have any income chargeable under head income from other sources (either PGBP/Capital gain/other sources) than this section shall not be applicable.

Explanation.—For the purposes of this section,—

6[(i) "banking company" means a company to which the Banking Regulation Act, 1949 (10 of 1949), applies and includes any bank or banking institution referred to in section 51 of that Act ;]

(ii) “co-operative bank” shall have the meaning assigned to it in Part V of the Banking Regulation Act, 1949 (10 of 1949) ;

(iii) “loan or deposit” means loan or deposit of money.

Section 269T

No branch of a banking company or cooperative bank and no other company or cooperative society and no firm or other person shall repay any loan or deposit made with it otherwise than by an account payee cheque or account payee draft drawn in the name of the person who has made the loan or deposit if-

(a)    The amount of the loan or deposit together with interest payable thereon is Rs.20,000 or more or

(b)   The aggregate amount of the loan or deposits held by such person with the branch of a banking company or cooperative bank of other company or cooperative society or firm or other person, either in his own name or jointly with any other person on the date of such repayment together with interest if any payable on such loan or deposit is Rs.20,000/- or more.

Nothing contained in this section shall apply to repayment of any loan or deposit taken or accepted from :-

(i)                  Government

(ii)                Any banking company, post office savings bank or co-operative bank

(iii)               Any corporation established by a central, state or provincial act

(iv)              Any government company as defined in section 617 of the companies act 1956.

Explaination:-    Loan or Deposit means any loans or deposit of money, which is repayable after notice or repayable after a period and, in the case of a person other than a company, includes loan or deposit of any nature.

Analysis

In the second clause Where if assessee made a fixed deposit with the bank for Rs.18000/- and after one year the bank has to repay RS.21000/- , then the bank cannot pay such amount in cash.

Penalty

If any of the above provisions are violated then the penalty shall be equal to the amount of loan or deposit taken or accepted or repaid.