I have come across a situation which doing tax audit of a client where the opening outstanding amount of creditors is more than 1 lac and he has made payment in various installments of 15000/- on different dates in cash. Is this way is correct or same could be disallowed.Please clarify.
3 Replies
Miss Rinkal
(Student)
(1309 Points)
Replied 15 September 2015
It is an allowable expenditure. Sec 40A(3) shall be attracted if all the following conditions are fulfilled and if any 1 condition is not fulfilled, then 40A(3) is not attracted:
- Assessee incurs any expenditure
- In respect of which payment or aggregate payments made
- To a person
- In a single day
- Of a sum exceeding Rs 20000/-
- Otherwise than by an account payee cheque or account payee DD
Miss Rinkal
(Student)
(1309 Points)
Replied 15 September 2015
Hence in your case, cash is paid on different dates. Therefore Sec 40A(3) is not attracted
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