sec 40a(3)

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Mayur Arora (CA Final) (295 Points)
Replied 03 December 2010

I also think that Aditya Sir is right because the payment to Debtors is not covered under section 40A(3) Rule 6DD

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it falls in a ambit of cash payment even if any payment made by cheque which is not account payee is a cash payment and get disallowed

Manoj Khandelwal (Practice) (347 Points)
Replied 03 December 2010

It will be disallowed.

Hardik Dave (IPCC and CS Professional(FINAL) Student) (15533 Points)
Replied 03 December 2010

I think it will be disalloowed, i think

CA Ashok Prasad (Practitioner) (133 Points)
Replied 04 December 2010

Sec. 40A(3)

Where the assessee incurs any expenditure in respect of which a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, exceeds twenty thousand rupees, no deduction shall be allowed in respect of such expenditure.

I think above sec. has been devised to make accountable for every payments and stop non-accountancy in the book.

so making a case payment to bank will not stop claiming the payee from payments actually might not have been paid by payee. so there is chance of real misuse of above provision.

so sec. 40A(3) will apply in this case.

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CA Bhupinder Arora (Accounts Executive) (76 Points)
Replied 04 December 2010

As per Section 40A(3) Payment exceeding Rs. 20000/- in cash should be made by account payee cheque or a bank draft.

As per the facts given in the question, it is clearly shown that the payment of cash is made in indirect way thourgh deposited the cash in Mr. X (Punjab) bank account instead of direct payment to him. It indicates that the payment is ultimately given to creditor i.e. Mr. X (Punjab), hence Section 40A(3) attracted and the amount of Rs. 50000/- is disallowed.