Rajesh ranka (CA) (80 Points)
28 December 2015
Jaspal Singh
(Practising CA)
(449 Points)
Replied 28 December 2015
Ankit Taprania
(CA FINAL )
(542 Points)
Replied 29 December 2015
NO, 48000 payment will not be diallowed u/s 40A(3) .
since , although your payment is exceeding 20000 but your expenditure is not exceeding rs 20000. and for diallowance u/s 40A(3) both the payment as well as your expenditure should exceed rs 20,000.
HOWEVER , i diagree with Mr JASPAL SINGH , that 40A(3) does not cover purchase payment .
since SUPMEMECOURT case of Attar Singh Gurmukh Singh v. ITO [1991] has clearly said word "expenditure" in 40A(3) also covers purchase of sock in trade also .
"Section 40A(3) refers to the expenditure incurred by the assessee in respect of which payment is made. It means that all outgoings are brought under the word “expenditure” for the purpose of the section. The expenditure for purchasing stock-in-trade is one of such outgoings. The value of the stock-in-trade has to be taken into account while determining the gross profits under section 28 on principles of commercial accounting. The payments made for purchases would also be covered by the word “expenditure” and such payments can be disallowed if they are made in cash in the sums exceeding the amount specified under section 40A(3) "
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