CA Balram Sharma (CA) (839 Points)
04 November 2009IF THE ASSESSE PAY THE EXPENSE TO THE SPECIFIED PERSON REFERED U/S 40A(2) IN CASH IN DAY MORE THAN RS 20,000.
SUPPOSE THE FAIR VALUE OF EXPENSE IS Rs 19000 AND CASH PAID Rs 30000.
WHICH SECTION WILL BE APPLICABLE FIRST SEC 40A(2) OR SEC 40A(3).
BECAUSE IF WE APPLY FIRT ONLY Rs, 11000 WILL BE DISALLOWED AND IF WE APPLY SECOND WHOLE SUCH AMOUT(30000) WILL BE DISALLOWED.
CA Trinath Galla
(student)
(3130 Points)
Replied 04 November 2009
think section 40A(3) should be applied as it is cash payment exceeding Rs.20,000, the whole of such amount should be dis allowed if doesn fall within the view of the exceptions for sec 40A(3).
As u said if the first is applied only 11,000 will be dis allowed.it amounts to voilation of the later also.
Max Payne
(employed)
(2574 Points)
Replied 04 November 2009
40A(2), because it comes before 40A(3) in the Act. The order in the Act to be follwed in the situations like this.
40A(3) will not be attracted since there should be minimum disallowance of Rs.20,000/- for 40A(3), but there will only be 11,000/- after applying 40A(2). No question of disallowing an expense under more than 1 provision.
CA Trinath Galla
(student)
(3130 Points)
Replied 04 November 2009
| Originally posted by :G.K.. | ||
| " | 40A(2), because it comes before 40A(3) in the Act. The order in the Act to be follwed in the situations like this. 40A(3) will not be attracted since there should be minimum disallowance of Rs.20,000/- for 40A(3), but there will only be 11,000/- after applying 40A(2). No question of disallowing an expense under more than 1 provision. |
" |
amount will be disallowed u/s 40A(3) if payment is more than 20,000.
here it is 30,000.
order of commencment in the act doesn matter.
can u clearly mention wat do u xactly mean by min disallowance of 20,000.
the dis allowance u/s 40A(3) now will be 30,000 i.e., >20,000?????
Arvind Sharma
(ACA)
(1432 Points)
Replied 04 November 2009
Be practical Mr Balram... its a cash payment, you can manipulate it in many ways...
suppose you are assessee, and you have paid Rs. 30000/- out of which Rs. 11000/- is unreasonable.., so what you will want.., off course, you will disallowed only Rs. 11000/-...
but it is also not necessary to do so.., simply show payment of Rs. 30000/- in two installment of Rs. 15000 of any amt with in limit of Rs. 20000/- in two days instead of a single day.. understand..
but ok., you can avoid dis-allowance of Rs. 30000/- but when you need two prove whether the payment is fair or not, then you may face problem, so it is better to disallow only Rs. 11000/- i.e. excess payment over reasonable...
understand...
CA Balram Sharma
(CA)
(839 Points)
Replied 05 November 2009
| Originally posted by :Arvind | ||
| " | Be practical Mr Balram... its a cash payment, you can manipulate it in many ways... suppose you are assessee, and you have paid Rs. 30000/- out of which Rs. 11000/- is unreasonable.., so what you will want.., off course, you will disallowed only Rs. 11000/-... but it is also not necessary to do so.., simply show payment of Rs. 30000/- in two installment of Rs. 15000 of any amt with in limit of Rs. 20000/- in two days instead of a single day.. understand.. but ok., you can avoid dis-allowance of Rs. 30000/- but when you need two prove whether the payment is fair or not, then you may face problem, so it is better to disallow only Rs. 11000/- i.e. excess payment over reasonable... understand... |
" |
MY DEAR I'M JUST WANT TO KNOW WHICH SECTION WILL APPLICABLE FIST, ONE THINK I WOULD LIKE TO SAY I'M VERY PARTICAL PERSON
sowkhya
(articled assistant-CA Final(New))
(114 Points)
Replied 05 November 2009
40A(3) sir. cz as trinath says...if only 11000 wud b disallwd, it leads to violation of 40A(3). n since cash payment exceeds rs.20000 at the first place.so it goes under disallowance...what percentage of it is fair value is the second thing...
its mor than 20000
in one day
n paid in cash
therefore, 40A(3) disallowance applicable
CA Sidhi Gaur
(Chartered Accountant)
(247 Points)
Replied 05 November 2009
Sec 40A(3) wl be applicable here as it wl directly go under disallowance.U hv made a cash payment of more than 20000 in a single day.
fair value concept wl arise wen assessing officer wl find it unreasonable bt it is disallowed in 1st case only, there fore d matter of refering sec 40A(2) does nt arise.
CA Ayush Agarwal
(Kolkata-Pune-Mumbai)
(27186 Points)
Replied 13 November 2009
simply both sections applying n wholw sum will be disallowd.
CA Ayush Agarwal
(Kolkata-Pune-Mumbai)
(27186 Points)
Replied 13 November 2009
simply both sections applying n wholw sum will be disallowd.
Aditya Khaitan
(Manager Accounts & Tax)
(40 Points)
Replied 18 November 2009
First 40A(2) will be applied because only fair value of expenditue is allowed irrespective of payment in cash or any other mode above Rs 20000/-.
In the Given Query,40A(2) will apply first which brings down the actual expenditure to rs 19000/- Hence 11000/- will be disallowed under section 40A(2)
Now since the amount of expense(Rs 19000) is less than rs 20000/- it is an allowable expenditure..(Rs 30000/- is just excess payment of expenses..)
However if the fair value would have been more than Rs 20000/- whole amont would have been disallowed
CA Devanshi Gandhi (Ajani)
(FCA DISA Mcom CIFRS & LLB)
(9060 Points)
Replied 18 November 2009
100% disallowance
CA Nishant Chakrawarti
(Audit MAnager)
(77 Points)
Replied 18 November 2009
30000-11000=19000 will be allowed as a deduction as 40A(2) precedes over 40A(3)
CAclubindia
