Disallowance under section 40 A (3) of Income Tax act of Ind
Nitin Kale
(Querist) 17 September 2009
This query is : Resolved
Please clarify legal position under above section for following scenario :
Payment made to transporter against each LR does not exceed Rs 20000/-. However during the day payment to same transporter against different LR exceeds Rs 20000/-. The freight is paid on to pay basis.
1. Is the amount so paid in excess of 20000 disallowed ?
2.Since transportation is on topay basis,can each transaction be viewd separetly and not be clubbed.
Is there any compliance required, where the expenses are not disallowedriven
A V Vishal
(Expert) 17 September 2009
Enhancement of limit for disallowance of expenditure made in the case of transporters Under the existing provisions of the Income-tax Act, where an assessee incurs any expenditure, in respect of which payment in excess of Rs 20,000 is made otherwise than by an account payee cheque or account payee bank draft, such expenditure is not allowed as a deduction. Given the special circumstances of transport operators for incurring expenditure on long haul journeys, it is proposed to raise the limit of payment to such transport operators otherwise than by an account payee cheque or account payee bank draft to Rs 35,000/- from the existing limit of Rs 20,000/-. For this purpose a new proviso is proposed to be inserted after the proviso in sub-section (3A) of section 40A of the Income-tax Act. The existing limit for other categories of payments will remain at Rs 20,000/- subject to the exceptions declared in Rule 6DD of the Income-tax Rules. The proposed amendment will apply to transactions effected on or after the 1st October, 2009. [Clause 16]
riven
KUMAR JAGADEESAN
(Expert) 17 September 2009
Dear Mr.Nitin
As excplanined by Mr.Vishal if payment in aggregate to the same person if exceeds Rs.35,000, if made by cash would be disallowed.This enhanced limit is applicable from 01.10.2009 that too only for payment for carriage of goods. For other expenditure the limit remains at Rs.20,000/-
Whether it is on to pay or paid basis the position as per law is the same.
J.KUMAR
Hyderabadriven
