Pls Help me Sec 40A(3)

Page no : 2

Shiv Nath kapoor (Student) (29 Points)
Replied 21 October 2010

As per section 40A(3) assessing officer will surly disallowed the same.

The fact of the case is, we are making payment in cash to supplier with the only difference, instand of supplier we are summited the cash in bank.

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Jayadev (m) (21 Points)
Replied 21 October 2010

Yes any payment or deposit of cash into supplier account will be dis allowed under sec 40A(3)

Karan (CA) (207 Points)
Replied 21 October 2010

Section 40A(3) shoul not be read in isolation, reading it together with Rule 6DD makes it clear that the payment in your case wont be disallowed if the origin and conclusion of transaction is traceable.

Abhishek Jain (RisK Manger) (231 Points)
Replied 21 October 2010

it will attract provisions of Sec 4o A (3)

CA Sonia Narang (Deputy Manager- Audit) (62 Points)
Replied 21 October 2010

Yes According to Sec 40A(3), it will be disallowed.

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Pradeep Patankar (IFRS ( London)) (289 Points)
Replied 21 October 2010

u'll get dis-allowance u/s 40(A)3 for that payment...

(Guest)

yeah it attracts 40A(3)

Pradip Narsingani (Income Tax & GST Consultant/ CA-Final) (572 Points)
Replied 21 October 2010

totally agreed with Sharad Saini

Bhav Bhuti Sharma (Towards Professionalism ) (823 Points)
Replied 21 October 2010

The Bangalore bench of the Income tax Appellate Tribunal held that such expenditure can be fully allowed as a bsiness expenditure in the situation referred in the query. Citation:- SriRenukeswara Rice Mills Vs.ITO (2005) 278 ITR 77.-----B.Chackrapani Warrier

1 Like

Nagaraj.halwal (Article Assitant) (45 Points)
Replied 21 October 2010

u can advance any amt. but keep in mind that the must not be shown as expenditure. ur quastion is in the nature of expenditure so sec 40A(3) attracts

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CA Shiv (Business Controller) (2987 Points)
Replied 21 October 2010

The main objective behind 40a(3) is to track and reduce black money in economy.

Here when one directly deposit in the suppliers bank account doesnt create a problem.

But still there is no caselaw for that and hence it will be disallowed.

THe case as mentioned by Bhav sharma is particularly for the Agriculture products.

pls refer to: https://www.caclubindia.com/experts/tax-audit-sec-40a-3--398785.asp

So it will be disallowed as Ito cannot track everytime that where the amount is deposited.

1 Like

Suru Venkateswarlu (CA Practice ) (59 Points)
Replied 22 October 2010

Relevant Case Law: Sri Renukeswara Rice Mills v. ITO [2005] 93 ITD 263 (Bang.) In the above case, it was held that Sec. 40A(3) is not applicable because origin and conclusion of transaction are traceable. The above expenditure is not disallowed u/s 40A(3).

CA.Suru Venkateswrlu

Bhubaneswar

surukotni @ yahoo.com

1 Like

sajay kumar (IPCC STUDENT) (162 Points)
Replied 22 October 2010

yes to escape form sec 40A(3), we need to give a/cpayee check. then only it is allowed as expence

aruna maheshwari (article) (22 Points)
Replied 24 November 2010

According to sec 40A(3) any payment in cash more than Rs 20000 is disallowed. Here in this case client is depositing cash for making payment in bank account directly. its also like making cash payment so it is hit by this sec for disallowance