Business payment in cheque
SABIR AHMED
(Querist) 17 November 2016
This query is : Resolved
Dear Expert,
One of my new supplier does not have current bank account. His business is an unregistered sole proprietorship firm. Although, he has certificate of enlistment from the Kolkata municipal corporation, but not having Vat registration due to exemption being on his firm's turnover limit. He has supplied me materials worth Rs. 22000 and the amount is due to him for payment. Initially, he asked me for the payment in cash. But, I insisted on cheque payment,since, the amount is above Rs.20000/-. Now, he has agreed to receive the payment in cheque in his personal name, which he would deposit in his savings a/c. The trade/ firm name printed on the purchase bill and his name are not the same. In fact, before he invoiced me, he submitted me a xerox copy of his certificate of enlistment & PAN card. The certificate of enlistment bears his firm's name, place of business adress, his name being the proprietor and nature of business. I find, everything ok. Only thing is that his company's name printed on the invoice and his name are 2 different. Take for an instance, his firm's name is XYZ co.( printed on the bill ) & his name is 'Ram kumar'. Now, my question is, can I legally issue the cheque favouring 'Ram kumar' instead of ' XYZ co'. If so, for what documents should I ask from him before handing over the cheque to him.
Ms.Usha Kapoor
(Expert) 17 November 2016
yOU OBTAIN CERTIFICATE OF COMMENCEMENT OF BUSINESS.
Rajendra K Goyal
(Expert) 17 November 2016
Registration of proprietorship firm not mandatory.
It is strange, the supplier of Municipal corporation is not having any account in the name of the firm.
You should issue cheque in the name of the firm as mentioned in the invoice to you and have receipt of cheque issued.
You can think of paying the amount in 2-3 installments, however, after demonetisation cheque would be better option for both.
Kumar Doab
(Expert) 17 November 2016
"he has certificate of enlistment from the Kolkata municipal corporation.....................he submitted me a xerox copy of his certificate of enlistment & PAN card. The certificate of enlistment bears his firm's name"
The original invoice is raised by firm.
Pay to firm by cheque.
Obtain acknowledgment.
H.M.Patnaik
(Expert) 17 November 2016
Agreed with Mr.Doab,in the given circumstance, you have to issue cheque in the name of the firm. The supplier will open a current account in any bank for encashing the cheque.
Dr J C Vashista
(Expert) 20 November 2016
Consult a local lawyer for such a vague query as you have changed your stance and contradictory statement by providing different versions, which are required to be analysed properly by a professional person.
Kumar Doab
(Expert) 20 November 2016
Agreed with Dr J C Vashista.
Your own counsel can help you further.
Rajendra K Goyal
(Expert) 20 November 2016
Can refer previous advice.
Issue cheque in the name of person mentioned in invoice as seller / supplier.
H.M.Patnaik
(Expert) 21 November 2016
Nothing more to add.
SABIR AHMED
(Querist) 26 November 2016
Dear Mr. Goyal,
You seem to be very near to providing me the solution. In the meantime, I had consulted one of my friend's neice, who has just qualified as a cost accountant from ICWAI, apropos of, if I can legally issue a cheque in the personal name of the supplier. She confirmed that I can issue the cheque in the supplier's personal name, nevertheless, his firm's name is different. The following points she highlighted after going through the invoice:-
1) This supplier is an unregistered sole proprietor. Registration is not mandatory for a sole proprietor, as there is exemption on the annual turnover, which is Rs.10,00,000/-, vide WBST circular, 2015
2) An unregistered firm can legally invoice to registered as well as unregistered firms, provided, VAT/ CST charges should not reflect in the invoice/ bill.
3) An unregistered sole proprietor can legally operate from his personal savings a/c ( although not recommended ). So current account is not mandatory.
4) The supplier's firm name, say ' XYZ CO' is only a trade / business/ fictitious name & does not imply legal implications. The proprietor of a sole proprietorship firm is taxed as an individual & not as a co. by the IT department. It is not illegal to use any assumed name for his business.
5) A person can legally start business by forming a sole proprietor ship firm after obtaining trade licence from kolkata municipal corporation & PAN card from IT deptt., GOI. NOTHING MORE IS NEEDED.
6) The supplier should print his personal name next line to his firm name, PAN no., place of business address, phone, fax/ e-mail. For an example, like this-
INVOICE
Invoice no.:.....
XYZ co., Date: .......
( proprietor: Ram Kumar )
PAN: ..................
Address: ..........
Phone..........
Fax: ............
Sir, I need to get the above highlighted points authenticated & confirmed by you. This young lady lacks professional exposure, as she is not involved in full - fledged practice.
Best Regards,
Sabir
Dr J C Vashista
(Expert) 27 November 2016
@Sabir,
Being a personal message to expert Sh. Rajendra K Goyal you should have contacted and consulted him directly and not through this public platform.
Rajendra K Goyal
(Expert) 27 November 2016
Leaving apart all your submissions, it is advised that if invoice is received from any firm, payment cheque should be in the name of firm. If invoice is issued by individual named supplier effect payment in his personal name.
Kumar Doab
(Expert) 27 November 2016
Hope you are satisfied.
