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Cash payment

JAVED SHAIKH (ACCOUNTANT) (46 Points)

30 January 2016

Advance payment made for land is this payment disallowed as per cash limit u/s section 40A(3).

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5 Replies

Venkateswar Reddy (Audit Assistant) (195 Points)
Replied 30 January 2016

It will be disclosed as per 269SS or 269T not as per 40A(3)

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CMA Poornima Madhava (CMA) (13112 Points)
Replied 30 January 2016

I think it will be disallowed for the reciever as per 269SS if such amount is <=20k
There cannot be 40A(3) disallowance for the payer because the transaction is capital in nature (not expenditure)

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Shivani Mittal (Practice) (425 Points)
Replied 30 January 2016

Hi Javed,

Advance payment for land is not a revenue expenditure. Hence, question of disallowance does not arise.

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CA Hariprasad Nayak (Chartered Accountant) (221 Points)
Replied 30 January 2016

Hi Javed,

It is not subject to 40A(3) disallowance as it is not an expenditure in the first place.

Supporting-

Section 40A(1) provides that certain disallowances provided in Section 40A need to be considered on arriving at the "Income from business". Obviously while computing the income from business you will not consider the payment for purchase of property as the same is not a revenue expense.

Other matters-

There is legal no consequence for the PAYER as the amended 269SS or 269T effective from 01.06.2015 do cover only acceptance and REpayment and not payment as such.

However, the receiver will be in trouble unless the reciever is exempted by virtue of Explanation below Section 269SS.

Hope the avove was useful.

Regards,

CA HAriprasad.

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