WHICH SECTION WILL APPLICABLE FIRST SEC 40A(2) OR 40A(3)

Page no : 3

kanika saluja (article) (45 Points)
Replied 12 February 2010

As per interpretation of the Act i would say that first of all the amount of expense has to be decided.

Now applying Sec 40A(2) amount of expense shall be considered as Rs. 19000 for official purpose.Hence Rs.11000 will be considered as unreasonable and shall be Disallowed.

Now there is no need for applying Sec 40A(3) as the amount of Expense for Computing Business income is only Rs.19000.

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Debashis Mandal (Business & Tax Consultancy) (341 Points)
Replied 12 February 2010

Respected Balramji,

After going through a long difference of point of views, my point of view is that - say an expenditure is disallowable eg expenditure is not related to the taxable income, then whether u r paying it through cash or cheque does not matter, but the expenditure is simply disallowable, then after Sec 40A(3) is comming for mode of payments. so definitely 40A(2) will come first, then Sec 40A(3)

In given case as Rs11000 is disallowed first then balance Rs 19000 is allowable

Thanks

Debashis