I wanted to know that if we pay single party more than Rs. 50000 cash in year 2011 - 2012, is it disallowed or not.
Will there be any problem.
Pl reply ASAP.
11 Replies
Anumanchipalli Sathikonda
(Tax Consultant)
(1559 Points)
Replied 05 March 2012
Mr.Pratik Sharma
Your question is not clear. Anyhow assuming that your question is pointed to the provisions of section 40A(3) of Income-tax Act, 1961 I will try answer.
* Yes. If the payment is made towards any expenditure claimed as deduction under the provisions of sections 30 to 37.
*No. If the payment is made towards cost of acquisition of any property which is not an expenditure under the above sections. Example purchase of a motor cycle for the purpose of business. Depreciation u/s 32 can be claimed on the said motor cycle.
*No. If the payment is made towards any donation. Donations is not an expenditure under the sections 30 to 37.
To have clear idea regarding disallowance of the expenses u/s 40A(3), please study the provisions of Rule 6DD of Income-tax Rules, 1962 also.
Best Wishes
Sathikonda
C.P.CHUGH
(TAX CONSULTANT)
(93 Points)
Replied 05 March 2012
Further to what Sathikonda has stated in case the sm of Rs. 50000. is paid during a year but not on a single day but in instalments of less than Rs. 20000.00 per day shall not be disallowed even for expenses referred to in section 30 to 37 of the Act.
sivanagesh
(Assistant General Manager)
(45 Points)
Replied 06 March 2012
As per Sec 40A(3), cash payment of Rs.50000 can be made to single person in a single day t/w expenditure but if the payment is made against more than one bill of which each bill not exceeding Rs.20000.
Anumanchipalli Sathikonda
(Tax Consultant)
(1559 Points)
Replied 06 March 2012
Mr.Pratik Sharma, Mr.C.P.Chug and Mr.Sivanagesh
An amendmend has been made to section 40A(3) in the Finance Act, 2007 which has come into force with effect form 1-04-2007. As per the said amendment aggregate payments exceeding Rs.20,000/- even for different bills is paid in a day to a person the said payments are disallowed.
Earlier to the amendment there was a judgment of Orisssa High Court - CIT Vs. Aloo Supply Co., [1980] 120 ITR 680 (Ori). In the said judgement it was held that even aggregate payment exceeds the specified limit it is allowable if the payment is made to different bills.
Now the above case law will not be helpful because of the amendment brought into the section with effect from 01.04.2007.
Best Wishes
Sathikonda
purushottam kumar prasad
(student)
(23 Points)
Replied 06 March 2012
yes its depend on the bill amt in a day not year.
MAHENDRA KANTILAL TITA
(Account Executive)
(131 Points)
Replied 06 March 2012
Its True Cash Payment above Rs.20,000/- must be pay by cheque / po / dd to avoid penalty.... . IN my view all expenses above Rs.20,000/- must be pay by cheque am i Right ?
Anumanchipalli Sathikonda
(Tax Consultant)
(1559 Points)
Replied 06 March 2012
Mr.Mahendra Kantilal Tita
There is no penalty for payment of expenses exceeding Rs.20,000/- in cash. The entire expenditure will be disallowed i.e. that expenditure is not allowed to be deducted from the income earned to arrive the net profit.
Best Wishes
Sathikonda
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