Disallowance u/s 40a(3)

Yes it is Disallowed under Sec 40(a)(3) but there is a loophole that breakup the cash advance in less than 20 k per day Voucher.

Dear sir, 

The provision under section 40A(3) is laid down below : 

"Where the assessee incurs any expenditure in respect of which 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 payee bank draft, exceeds twenty thousand rupees, no deduction shall be allowed in respect of such expenditure "

As if see in the above provision it talks about the nature of payment towards which we are cosindering as expenditure. So though it is a advance or not. Numenclature is not important. 

Thanks 

Here the company has given the Advance to Mr.Y an employee as advance for expenditure and accounted as 

Advance for Expenses Mr Y a/c Dr.

To Cash A/c

Please Clarify?

is we are giving to employee amount ofRs.5,00,000 as advance for making different purchases or for making payment to that particular vendor.  And how the employee is making payments for the purchase of goods. 

We are giving advance for each purchase seperately on same day to Mr.Y suppose to be 15,000 for one purchase, one lakh for other purchase, and so on.

if the same amount the employee is paying in cash it to the creditor for purchase of goods then it will be disallowed.

it is allowed...u can pay ur employee cash more than Rs 20,000...but the final use or payment made by the employee should not exceed 20000..or it is disallowed