whether any amount paid by assessee to a company for depositing their octroi charges to govt will be disallowed u/s 40a(3)
for example: our client has hired a company safe express pvt ltd to deposit octroi on their behalf for which safe express charge them their service charge if the payment made in CASHsingle day exceed rs 20000 including octroi plus service charge will it be disallowed?
Proviso to Sec 40A(3)
Provided that no disallowance shall be made and no payment shall be deemed to be the profits and gains of business or profession under sub-section (3) and this sub-section where a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payeee bank draft, exceeds twenty thousand rupees, in such cases and under such circumstances as may be prescribed, having regard to the nature and extent of banking facilities available, considerations of business expediency and other relevant factors].
[Provided further that in the case of payment made for plying, hiring or leasing goods carriages, the provisions of sub-sections (3) and (3A) shall have effect as if for the words 'twenty thousand rupees', the words 'thirty-five thousand rupees' had been substituted.]
Rule 6DD
(a) where the payment is made to --
(i) the Reserve Bank of India or any banking company as defined in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949);
(ii) the State Bank of India or any subsidiary bank as defined in section 2 of the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959);
(iii) any co-operative bank or land mortgage bank;
(iv) any primary agricultural credit society or any primary credit society as defined under section 56 of the Banking Regulation Act, 1949 (10 of 1949);
(v) the Life insurance Corporation of
(b) where the payment is made to the Government and, under the rules framed by it, such payment is required to be made in legal tender;
(c) where the payment is made by --
(i) any letter of credit arrangements through a bank;
(ii) a mail or telegraphic transfer through a bank;
Not Disallowed
i agree that payment is made to govt by indirect way but here payment is first made to safe express in cash in my opinion it could be easily routed through bank and should be disallowed
This amount will be disallowed
because it is not going to Government. it is going to a company which is taking service charges also
so you must pay by A/c payee cheque
CAclubindia
