Question ID :
39338
Disallowance of Cash expenditure u/s 40A(3)
If I made payment of rupees of 15,000 in cash to a single person, in a single day but for two different invoices 1st for 8000 and 2nd for 7000
Is payment of rupees 15,000 allowable or not ?
Plz.. provide supporting section/rule/case law also...
Posted by
VIJAYKUMAR BHANUBHAI GEVARIYA
on
Aug 11, 2019
Filed Under
Profits & Gains of Business & Profession
Sir
You have to explain the nature of payment as there are restrictions on cash transactions. Please advise your client not to make cash payment as in of the cases this payment was disallowed and penalty proceedings against the CA signings Tax Audit Report was also issued notice.
Thanks
CHARAN DASS SHARMA
Posted by
Charan Dass Sharma on
Aug 12, 2019
Answer ID :
79112
Well advised by SharmaJi. However, u may refer CIT Vs. Kothari Sanitation & Tiles P Ltd (282 ITR 117 (Mad) .
Posted by
B.CHACKRAPANI WARRIER on
Aug 12, 2019
Answer ID :
79113
Assuming that the payment is made for the same expenditure, therefore, the instant case wil attract disallowance u.s. 40A(3). Otherwise, 40A(3) will not be attracted.
The limit is fixed for 'an expenditure'. Sec. 40A(3) is applicable only in respect of 'an expenditure' which is in excess of the threshold limit.
".........if purchase is effected from a single person by way of several bills/invoices and if value of each bill/invoice is less than Rs. 20,000 then payments made to settle each bill/invoice would not be hit by provisions of section 40A(3), as each bill/invoice has to be considered as a separate contract ........." - Tribunal decision in Raja & Co. v. CIT [2014] 64 SOT 12 (Cochin).
Decision in CIT v KOthari Sanitation and Tiles P Ltd (2006) 282 ITR 117 (Madras) is not applicable since the term '....in a sum....' was substituted in the provisions. Now there is a sea changes happened and the words '.....a payment or aggregate of payments made....' were added by substituting '.....in a sum.....'.
Its only my opinion.
Posted by
CA PRADEEP C B on
Aug 12, 2019