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Payment exceeding 20000/-

vineet (herherh) (54 Points)

21 October 2007

Can payment exceeding 20000/- be made to State Electricity Boards like M.P.S.E.B or govt sponsored mobile phone networks like BSNL? If yes, then why? Since MPSEB or BSNL are Government Companies and not the govt itself, and there is difference b/w the two...so can the payments exceeding 20000/- be made to such entities?? Please clarify..

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Late CA Sampat Jain (Chartered Accountant) (4772 Points)
Replied 22 October 2007

Payments to Central and State Governments, if the rules framed by such a Government provides for payment in legal tender, such as payment of direct taxes, customs or excise duties, sales tax, railway freight, etc. Thus, in case of payments made to railways on account of railway freight charges or for booking wagons, section 40A(3) will not apply - See Circular No. 34, dated 5-3-1970. Since BSNL is not a government payment to same is not covered under rule 6DD. Further , you have to examine the structure of electricilty board .....if the same is formed as organ of government , payemnt to them is payemnt to governemnt .