Hi amir bhai,

not able to PM u.. so here itself i am posting....

Yes, amir bhai, the payment does not EXCEED rs.20,000 in a day (its exactly 20,000!) so it wont be disallowed....

But to clarify something else, you said that the disallowance is attracted if payment is made against multiple bills. I SECOND THAT. AMEN to that.

Here is case law in which judiciary has hinted that the mechanism of 40A(3) is to disallow payments against expenditures, the total of which exceeds 20,000 as long as the payment exceeds the limits, and not by matching the payment against expenditure.

Interpretation of 40A(3) should be in the truest spirit of legislation.

You will need winrar to open the file...

Hi lakshmikanth,

I still suggest you to refer any text or reckoner for reference purpose...

But fin act 2009 the amendment which came to my mind is Rs.35000 limit for payment to goods transport agency, for carrying goods by road...

Rule 6DD, there were clarifications for availing exemption from 40A(3) on payment to person

1. who is a producer of meat (Crudely, there should a butcher, he should sell meat, he should give a declaration that the case payment was made on his insistence, and a veterinarian shud certify that the livestock was sold by a producer of meat under his supervisions!), i dont know the circular details...

2. who is a producer of fish and fish products etc (For that i am attaching the circular copy for you reference)

Brother,

Couldnot open ur attachment....

Anyways I didn't said that "dissallowance gets attracted in case of multiple bills" rather I said that dissallowance won't be attracted in case of multiple bills, because of the specific use of the word "expenditure" for dissallowance & not "payment'

DOING TRADING BUSINESS I.E. SALE / PURCHASE OF GOODS LOCAL OR OUTSIDE DELHI

IS THERE ANY LIMIT FOR: CASH SALE OR CASH PURCHASE

PLEASE ADVISE

A K MITTAL

Brother,

Completely agree these are two opposite views & I think equally strong, n u r rite no point in debating...

Ok I will search n if I could get anything more on this, will update u....Even I m ready to flip the sides, no issues.....

Can Anybody clarify whether this section is applicable on purchase of Fixed Assets. 

As per my knowledge

In Act, Fixed assets are no covered under this section But as per V.K. Singhanai, this section is applicable on Fixed assets purchase also..................

Guys Comment.......,,,,,,,,

dear arjit

sec 40A(3) not applicable to fixed assets because it is not allowed for deduction

Dear Arjit,

THE ANSWER THAT MAY SHOCK YOU - YES

As per the wordings in section 40A(3), ANY EXPENDITURE in respect of which deduction is allowed, will be disallowed if the payment exceeds Rs.20,000.....

If you take Section 35

Assessee is being allowed 100% deduction for revenue and capital EXPENDITURE including expenditure for acquisition of necessary assets for R&D (other than land)........

This is very much within the ambit of expenditure referred u/s 40A(3):

1. You are incurring expenditure

2. The expenditure has been allowed as deduction

Pls note that the entire capital expenditure is allowed in one year, unlike the depreciation allowed for other assets...

40A(3) does not ordinarily apply on the depreciable assets or on depreciation (which is an allowance, and not an expenditure).

Ironically, section 35 provides that where full effect cannot be given to sec 35 deduction, it shall be treated in the same manner as unabsorbed depreciation referred to in section 32.

Please post your views on this parody.... :)

I think the payment on the first day, would be disallowed, provided its not on a capital expenditure. And the expenditure on second would be allowed as its exact Rs. 20,000.00. Now I dont understand what Amir want to say about that bills issue. Did you mean that one can make payment exceeding Rs. 20,000.00 if its in respect of multiple bills?? Also plz... try to clarify that the how a fixed asset is covered under sec. 40A(3). Thanks......

Even i guess GK is right.. even i read in ready reckoner somewher that 40A(3) is applicable for all expenses within sec 32 - 37...so sec 35 will attract 40 A 3 i suppose

Any purchase of materials like consumbles/raw material in excess of 20000/- against a invoice is an allowable expenditure or not?pls suggest me.

thanks in advance.

Originally posted by : sameera
	Any purchase of materials like consumbles/raw material in excess of 20000/- against a invoice is an allowable expenditure or not?pls suggest me. thanks in advance.

Its allowable but payment should not be made in CASH  in a single day for amount more than Rs. 20000/-.

Originally posted by : sameera
	Any purchase of materials like consumbles/raw material in excess of 20000/- against a invoice is an allowable expenditure or not?pls suggest me. thanks in advance.

Of course you can purchase raw material in excess of Rs. 20,0000.00. The only thing to consider is mode of payment. It cant be more than Rs. 20,000.00 in cash in a single day. 

we had a client where the client needs to work outside his premises i.e customers place.the expenditure will be incurred by workmen at site daily and the whole expenses for all those month will be paid  at head office once in a lumpsum payment exceding rs20000/-which also include raw material purchases.pls suggest me what would be status of taxablity in this case.

thanks in advance.