Each bill of transporter ranges approx. between 40000-50000 and the payment is made in cash against each bill as the transporters were not ready to take their payment via a/c payee cheque or bank braft, so it is not allowed as per sec 40a 3 of the income tax act. now the case is under scrutiny.is their any remedy to overcome dis situation?Is there any provision in law by which we can convince the AO that as the transporters were not ready to take their payment via cheque or bank draft, so there was no other way...
26 Replies
Harshal
(Article Assistant )
(182 Points)
Replied 24 November 2009
Hi Rohit..
As per Section 40(A)(3), any amount paid over Rs. 20000/- other than by a/c payee cheques and demand draft...
The only remedy to ur problem is to prove that the tranporter to whom the payment were made were not enjoying banking facilities....for this in section 40A it is been said that no disallowance under this sub-section shall be made where any payment in a sum exceeding twenty thousand rupees is made otherwise than by a crossed cheque drawn on a bank or by a crossed bank draft, in such cases and under such circumstances as may be prescribed, having regard to the nature and extent of banking facilities available, considerations of business expediency and other relevant factors.
I hope this solves ur problem...
Harshal Sutaria
Max Payne
(employed)
(2574 Points)
Replied 24 November 2009
@ Rohit.
That wont work. See section 40A(4).
sivaram
(Asst Mgr-Taxation)
(6918 Points)
Replied 24 November 2009
ask the transporter to split the bills each less than Rs 20000/- and pay by cash as it is difficult to prove to AO that the transporter does not have bank accounts
Narayanan.R
(Chartered Accountant)
(191 Points)
Replied 24 November 2009
| Originally posted by :c.a rohit | ||
| " | Each bill of transporter ranges approx. between 40000-50000 and the payment is made in cash against each bill as the transporters were not ready to take their payment via a/c payee cheque or bank braft, so it is not allowed as per sec 40a 3 of the income tax act. now the case is under scrutiny.is their any remedy to overcome dis situation?Is there any provision in law by which we can convince the AO that as the transporters were not ready to take their payment via cheque or bank draft, so there was no other way... | " |
As per Sec 40 A(3) the following will be disallowed:
If payment is made by other than A/c Payee CHeque or Bank draft
If more than Rs. 20000 is paid by during a day to same person against the same bill then it attracts.
Generally,
If the payemnts are made for different bills for same
CA Rohit Garg
(CA )
(330 Points)
Replied 24 November 2009
shivram sir but it is not possible to arrange bills again now..
Max Payne
(employed)
(2574 Points)
Replied 24 November 2009
| Originally posted by :c.a rohit | ||
| " | Each bill of transporter ranges approx. between 40000-50000 and the payment is made in cash against each bill as the transporters were not ready to take their payment via a/c payee cheque or bank braft, so it is not allowed as per sec 40a 3 of the income tax act. now the case is under scrutiny.is their any remedy to overcome dis situation?Is there any provision in law by which we can convince the AO that as the transporters were not ready to take their payment via cheque or bank draft, so there was no other way... | " |
40A(4) says that a person cannot refuse to take payment by account payee cheque or DD, and tender by account cheque or DD is equal to payment by cash, and this provision applies notwithstanding anything contained in any other law. So the truck drivers cannot say that they are not willing to accept DD/cheque, and that they want cash itself. They are not entitled to make such a demand on you, and you are not required to pay in cash.
So it can't be a valid explanation for paying in cash
Max Payne
(employed)
(2574 Points)
Replied 24 November 2009
The way out would be to make the payment entry on a holiday. But again you might have to produce a receipt.
pratik
(CA, CS )
(60 Points)
Replied 24 November 2009
see section properly. u can prove by telling that banking facility is not available with the party so u will be allowed this section
Max Payne
(employed)
(2574 Points)
Replied 24 November 2009
| Originally posted by :pratik | ||
| " | see section properly. u can prove by telling that banking facility is not available with the party so u will be allowed this section | " |
Yes i am agreeing with you, but there is a difference between not having a bank account and not having banking facilities.
Ansari
(ca final)
(444 Points)
Replied 24 November 2009
Go through Rule 6DD(j), which provides that payment required to be made on a day on which the banks were closed.
kabirsen
(student)
(251 Points)
Replied 24 November 2009
split the bills if possible below 20000
for this provision 2 tk effect both expenditue and pmt shud exceed 20k
kabirsen
(student)
(251 Points)
Replied 24 November 2009
pmt under 6dd will be very hard to prove. burden of proof will be on assessee. it wud be very difficult to prove that pmt was made in a place where there is no banking facilites or pmt is made on bank holidays
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