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If a company deposits cash say Rs 50,000 directly to the bank account of the payee for purchase of raw materials will this attract section 40A(3).
Regards,
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Does this attract 40a(3)
Replies (5)
Dear D. Majumdar,
Direct deposit in to the account of the seller involves two transaction - (i) payment (in cash) and (ii) deposit into bank account (on behalf of seller).
As per the provisions of sec. 40A(3), no deduction shall be allowed of the expenses in respect of which the payment/s is/are made "otherwise than by an account payee cheque or account payee bank draft".
Thus since the payment is made in cash (otherwise than by account payee cheque/bank draft) therefore the provisions of sec. 40A(3) will get attracted as the payment made is of amount exceeding Rs.20,000/-.
Regards.
Company deposits directly in the account of the payee in bank for purchase of raw materials in such case 40A(3) will not apply CA Prabhakar Latkan
Sec 40A(3) is attracted, as payment is made violating the norms stipulated there in, as correctly interpreted by Mr.Bhavin.
As the payment is made by directly depositing {instead of using drafr, cheque, debit card, credit card} will violate the rules attached in section 40a{3}...
yup..40A(3) is applicable. Entire expense will dissalow
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