40A(3) IT ACT HAS A VIRUS
VINAYAK MUNGI
(Querist) 19 April 2009
This query is : Resolved
THE DISALLOWED AMOUNT IN 40A(3) GENERATES BLACK MONEY IF THE CASH HAS BEEN ENTERED IN THE BOOKS OF ACCOUNT OF THE PAYEE WHO IS IT ASSESSE
NO LAW IS THERE TO STATE THAT THE DISALLOWED AMOUNT SHOULD NOT BE ADDEDTO THE PROFITS OF THE FIRM/PARTNER/PROPRIETOR
IF A FIRM X HAS INCURED AN EXPENDITURE OF MORE THAN THE LIMIT SPECIFIED AT A UNDER 40A(3) OF ANY PERIOD AFTER THE ACT WAS ENACTED . THE EXPENDITURE IS INCURED FOR PURCHASE OFF RAW MATERIAL FOR PRODUCTION.
THE PAYMENT IS MADE TO A FIRM Y WHO IS AN INCOME TAX ASSESSEE. ENTERS THE CASH
IN HIS BOOKS OF ACCOUNT
THE ASSESING OFFICIER DIALLOWS THE EXPENDITURE AND ADD TO THE INCOME OF THE
FIRM AFTER PAYMENT OF THE ADDED INCOME TAX . ADDS THE PROFIT AFTER TAX TO THE
PARTNER/PROPRIEETOR
NOW THE PROFIT OF THE PARTNER/PROP
IS A BLACK MONEY BECAUSE FIRM Y HAS ENTERED THE MONEY IN THE BOOKS OF ACCOUNT
AND WHICH IS THE SOURCE THE A.O HAS GRANTED THE MONEY(IN THE FORM OF DIALLOWANCE)
IF FIRM Y HAD NOT ENTERED IN THE BOOKS OF ACCOUNT THEN THERE IS NO BLACK MONEY GENERATED
AS THE DISALLOWNCE IS MADE ONE SIDED
WITHOUT VERIFICATION ON THE OTHER SIDE THAT IS THE PAYEE .BLACK MONEY (THE MONEY NOT ENTERED IN BOOKS OF ACCOUNT)IS GENERATED
THE PURPOSE OF THE LAW IS TO BLOCK THE BLACK MONEY GENERATED HOWEVER THE WRONG IMPLEMENTATION CREATES THE BLACK MONEY HENCE THE VIRUS
THE GENERATION OF BLACK MONEY CAN BE BLOCKED IF THE IMPLEMENTATION OF DISSALLOWNCE UNDER 40A(3) IS GURANTEED IF AND AND ONLY IF THE A.O HAS THE PROOF FROM THE PAYEE
THE ABOVE SAID CAN BE IMPLEMENTED IF POINT NO 5 IN CBDT CICULAR 22O OF 1977 IS
MANDATERY TO THE ASSESSE IN CASE IF HE WANTS THE ALLOWANCE MADE BY THE A.O FOR THE EXPENTITURE HE HAS PAID IN CASH
VINAYAK MUNGI
meson_services@yahoo.com
A V Vishal
(Expert) 19 April 2009
Dear Vinayak,
Your query is not clear, but please go through the amendment made u/s.40A(3) in the vote on budget for 2009:
The following sub-sections (3) and (3A) shall be substituted for sub-section (3) of section 40A by the Finance Act, 2008, w.e.f. 1-4-2009 :
(3) Where the assessee incurs any expenditure in respect of which a payment or aggregate of payments made to a person in a day, otherwise than by an account payeee cheque drawn on a bank or account payeee bank draft, exceeds twenty thousand rupees, no deduction shall be allowed in respect of such expenditure.
(3A) Where an allowance has been made in the assessment for any year in respect of any liability incurred by the assessee for any expenditure and subsequently during any previous year (hereinafter referred to as subsequent year) the assessee makes payment in respect thereof, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, the payment so made shall be deemed to be the profits and gains of business or profession and accordingly chargeable to income-tax as income of the subsequent year if the payment or aggregate of payments made to a person in a day, exceeds twenty thousand rupees:
Provided that no disallowance shall be made and no payment shall be deemed to be the profits and gains of business or profession under sub-section (3) and this sub-section where a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, exceeds twenty thousand rupees, 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.
VINAYAK MUNGI
(Querist) 19 April 2009
SIR
IF A FIRM X HAS INCURED AN EXPENDITURE OF MORE THAN THE LIMIT SPECIFIED AT A UNDER 40A(3) OF ANY PERIOD AFTER THE ACT WAS ENACTED . THE EXPENDITURE IS INCURED FOR PURCHASE OFF RAW MATERIAL FOR PRODUCTION.
THE PAYMENT IS MADE TO A FIRM Y WHO IS AN INCOME TAX ASSESSEE. ENTERS THE CASH
IN HIS BOOKS OF ACCOUNT
THE ASSESING OFFICIER DIALLOWS THE EXPENDITURE AND ADD TO THE INCOME OF THE
FIRM AFTER PAYMENT OF THE ADDED INCOME TAX . ADDS THE PROFIT AFTER TAX TO THE
PARTNER/PROPRIEETOR
NOW THE PROFIT OF THE PARTNER/PROP
IS A BLACK MONEY BECAUSE FIRM Y HAS ENTERED THE MONEY IN THE BOOKS OF ACCOUNT
AND WHICH IS THE SOURCE THE A.O HAS GRANTED THE MONEY(IN THE FORM OF DIALLOWANCE)
IF FIRM Y HAD NOT ENTERED IN THE BOOKS OF ACCOUNT THEN THERE IS NO BLACK MONEY GENERATED
AS THE DISALLOWNCE IS MADE ONE SIDED
WITHOUT VERIFICATION ON THE OTHER SIDE THAT IS THE PAYEE .BLACK MONEY (THE MONEY NOT ENTERED IN BOOKS OF ACCOUNT)IS GENERATED
THE PURPOSE OF THE LAW IS TO BLOCK THE BLACK MONEY GENERATED HOWEVER THE WRONG IMPLEMENTATION CREATES THE BLACK MONEY HENCE THE VIRUS
THE GENERATION OF BLACK MONEY CAN BE BLOCKED IF THE IMPLEMENTATION OF DISSALLOWNCE UNDER 40A(3) IS GURANTEED IF AND AND ONLY IF THE A.O HAS THE PROOF FROM THE PAYEE
THE ABOVE SAID CAN BE IMPLEMENTED IF POINT NO 5 IN CBDT CICULAR 22O OF 1977 IS
MANDATERY TO THE ASSESSE IN CASE IF HE WANTS THE ALLOWANCE MADE BY THE A.O FOR THE EXPENTITURE HE HAS PAID IN CASH
VINAYAK MUNGI
meson_services@yahoo.com
A V Vishal
(Expert) 19 April 2009
I am unable to understand precisely what is that you are trying to convey, once the expenditure is disallowed then the expenditure is added back to the extent disallowed and then tax is computed for which X has to pay the difference between the declared income and the assessed income, once the amount is taxed then where does the question of black money arises.
VINAYAK MUNGI
(Querist) 20 April 2009
THE DISSALLOWNCE IS THE PROFIT GENERATED
THE PROFIT GENARATED IS THE BLACK MONEY IF COMPANY Y HAS ENTERED THE AMOUNT IN HIS BOOKS
THE PROFIT GENERATED IS NOT BLACK MONEY IF
THE MONEY IS NOT ENTERED IN HIS BOOKS OF ACCCOUNT(IT IS FALSE SALE)
