Can cash payment be made against one bill of Rs. 100000/- being each payment below Rs. 20000/- on different days. for AY 09-10
15 Replies
praveen
(Chartered Accountant)
(6971 Points)
Replied 15 December 2011
No it cant be made even on different dates.
praveen
(Chartered Accountant)
(6971 Points)
Replied 15 December 2011
The Government explained this amendment as follows:-
Amendment to the provisions of section 40A (3) of the Income-tax Act, Section 40A (3)(a) of the Income-tax Act, 1961 provides that any expenditure incurred in respect of which payment is made in a sum exceeding Rs.20,000 /- otherwise than by an account payee cheque drawn on a bank or by an account payee bank draft, shall not be allowed as a deduction. Section 40A (3)(b) also provides for deeming a payment as profits and gains of business or profession if the expenditure is incurred in a particular year but the payment is made in any subsequent year in a sum exceeding Rs. 20,000/- otherwise than by an account payee cheque or by an account payee bank draft. However, the provisions of this section are subject to exceptions as provided in Rule 6DD of the Income-tax Rules, 1962.
Section 40A (3) is an anti tax-evasion measure. By requiring payments to be made by an account payee instrument, it is possible to verify the genuineness of the transaction thereby mitigating the risk of evasion. It has come to notice that the provisions of section 40A (3) are being circumvented by splitting a particular high valuepayment to a person into several cash payments, each below Rs. 20,000/-. This splitting is also resorted to for payments made in the course of a single day. Courts have also held that the statutory limit in section 40A (3) applies to payment made to a party at one time and not to the aggregate of the payments made to a party in the course of the day as recorded in the cash book. According to the judicial opinion, the words used are `in a sum’, i.e., single sum.
Abhay Sakaria
([Practicing C.A.] [C.S. Final])
(283 Points)
Replied 15 December 2011
If a several payment is made in different days for a single bill then such expenses is allowed for deduction
CA Ketan Waghela
(Partner at Elite Educare)
(356 Points)
Replied 15 December 2011
Manish ji,
The sec. speakes about not to make payment above Rs.20,000/- in cash or bearercheque in aggregate in a single day..
Several payments below Rs.20,000/- in cash can be made to single party on different dates.
However, it is not advisable in practical as it is a very risky transaction, may take the assessee in the litigation and the same may be disallowed thereafter.
Abhay Sakaria
([Practicing C.A.] [C.S. Final])
(283 Points)
Replied 15 December 2011
Yes Waghelaji,
I agree with ur practical view.
suchit shah
(Dy. Manager(Finance & Accounts))
(208 Points)
Replied 16 December 2011
Still if you want make payment in cash ( obviously less than 20000/- per day ) then make sure the other party has shown receipt of that cash on same date as yours in his accounts......
Raghunath Prasad
(WORKING)
(385 Points)
Replied 16 December 2011
14 On perusal of the aforesaid account, it is seen that the assessee had to pay sum of Rs. 2,00,000/- to M/s. Ram Kumar Krishan Kumar as on 01.04.2002. Thus, the total amount payable by the assessee was of Rs. 2,00,000/-. Thereafter, the assessee has paid the sum of Rs. 13,000/-, 14,500/-,14, 000/-,15, 000/-, 17,200/- and 12,650/- in cash on 19.06.2002, 20.06.2002, 21.06.002, 22.06.2002, 24.06.2002 and 25.06.2002 respectively, reducing the outstanding amount from Rs. 2,00,000/- to Rs. 1,13,650/- as on 25.06.2002. It is, thus, clear that the aforesaid payments on different dates is the repayment of the outstanding amount of Rs. 2,00,000/-. The repayment was thus made in respect of the amount of Rs. 2,00,000/- payable by the assessee. Merely because the amount of Rs. 2,00,000/-has been re-paid in part not exceeding Rs. 20,000/- on a single day would not absolve the assessee from rigour of section 269T of the Act as is clear from the section itself. Since the repayment on various dates is the repayment out of the amount of Rs. 2,00,000/-, though in part, the repayment is squarely covered by the provisions of section 269T of the Act.
VIJAYKUMAR
(CHARTERED ACCOUNTANT)
(203 Points)
Replied 16 December 2011
Provision of Sec. 269 T will attract to this case.
CA PRAVEEN SINGH
(MANAGER ACCOUNTS)
(2277 Points)
Replied 17 December 2011
YES U CAN DO...
DEDUCTION ALLOWED...
CA Ketan Waghela
(Partner at Elite Educare)
(356 Points)
Replied 17 December 2011
Raghunath ji and Vijaykumar ji,
Please clarify my doubt….
Sec 269T of the Act, applies for mode of repayment of any loans or deposits.
In this question we are discussing about repayment of bill (payment to creditor) in installments of less than Rs.20,000/- in cash. Is it considered as loan if paid in cash ????
Please clarify my doubt….
suchit shah
(Dy. Manager(Finance & Accounts))
(208 Points)
Replied 17 December 2011
Yes ketan u r right its not the case of 269ss/t.........its only the payment ot bill(expense) for which requirement of 40a(3) shall be taken into consideration....
CA Kiran Sutrave
(CA)
(428 Points)
Replied 18 December 2011
Dear Manish
Yes you can make such payment but it is advisable not to do so.
Second thing, Section 269T of the Act will only arise if the repayment of amount is for any loan or any deposit taken by the Assessee. In your case, it is re-payment of a liability and hence this section is not applicable to you.
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