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Crossing of Cheque

Ajay (CA Job) (512 Points)

30 June 2011

When a bussiness payment has been made thorugh internet banking, is Sec.40A(3) applicable (as the said section says any payment other than by crossed cheque or demand draft)?

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22 Replies

Sunshine (Helping All) (10575 Points)
Replied 30 June 2011

i think it wont be applicable...

the sole purpose of this section is to stop fake transactions in the books.

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FATEMA (CHARTERED ACCOUNTANT) (719 Points)
Replied 30 June 2011

Agree with sunshine.Ajay you are interpreting the section word by word which may not turn out to be practical in many of the cases.Sec 40 A(3) will not be applicable to your case

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Kapil Bansal (Accountant) (47 Points)
Replied 30 June 2011

Agree with sunshine

CA ADITYA SHARMA (CA IN PRACTICE ) (16719 Points)
Replied 30 June 2011

agree with sunshine. this section will not be applicable

Mukesh Kumar Singh (CA-FINAL) (4094 Points)
Replied 30 June 2011

This section will not be applicable for such transaction

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RAJU (LEARNER) (1089 Points)
Replied 30 June 2011

Hi,

I believe it is very correct to read the provisions word by word as the legislature would have used every word with a motive....

Regarding the query, there will be no disallowance as Rule 6DD of IT Rules provided for the exceptions.

Mukesh Choudhary (IPCC) (140 Points)
Replied 30 June 2011

Originally posted by : Sunshine...

I think the main purpose of cross chq.is, bank to bank txn. i.e. not as negotiable instrument so,the section wont be aplicable
.

rahul (Chartered Accountant) (5572 Points)
Replied 30 June 2011

That will b considered as good as bank tranfer...

One has to see true intention behind ths provision.

(Guest)

Originally posted by : Sunshine...
	i think it wont be applicable... the sole purpose of this section is to stop fake transactions in the books.

Mehul Jain (ROC and R&D Executive) (59 Points)
Replied 30 June 2011

Practically it wont be applicable as everyone said but provisions are provisions afterall. One can claim the disallowance and wait if it is objected by the assesing officer.

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Ajay (CA Job) (512 Points)
Replied 30 June 2011

Thank u all.... so i conclude that any payament made through internet tranfers are as good as making payments by crossed cheque/draft as allowed under Sec.40A(3)...

To Quote Mr.Dharmaraju "Regarding the query, there will be no disallowance as Rule 6DD of IT Rules provided for the exceptions."...just to confirm...are u talking about the clause in Rule 6DD im giving below ?

"(d) where the payment is made by—

(i) any letter of credit arrangements through a bank ;

(ii) a mail or telegraphic transfer through a bank ;

(iii) a book adjustment from any account in a bank to any other account in that or any other bank ;

(iv) a bill of exchange made payable only to a bank.

Explanation : For the purposes of this clause and clause (h), the term “bank” means any bank, banking company or society referred to in sub-clauses (i) to (iv) of clause (a) and includes any bank [not being a banking company⁵⁴ as defined in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949)], whether incorporated or not, which is established outside India"

Devendra (Chartered Accountant) (4775 Points)
Replied 30 June 2011

The Online payments can only be done through the Banks. Therefore the question of attraction of section 40(A)(3) does not arise.

Regards,

Devendra K

Aparna Raja K.C (Student) (520 Points)
Replied 30 June 2011

Originally posted by : Dharmaraju
	Hi, I believe it is very correct to read the provisions word by word as the legislature would have used every word with a motive.... Regarding the query, there will be no disallowance as Rule 6DD of IT Rules provided for the exceptions.