There are two drastic sections which are neither in the interest of revenue nor the public & assesses in particular.

“Law doesn’t mean it is to be implied because it is lawful to do so. Law doesn’t mean it should be so harsh which may not protect the interest of public because, the Law is for the protection of public.”

1. Section 40A(3)/ 40A(3A) of income tax act, 1961

Previously-in contravention of this section it was provided that 20% of the expenditure will be disallowed in case payment in excess of 20000/- is made otherwise than by crossed a/c payee cheque or Draft.

At present it is provided that in contravention of this provision the whole expenditure I e 100% of the expenditure will be disallowed.

The expenditure is an essential part of earning income liable to pay tax. It is improper to disallow the expenditure in toto. There may be some other treatment where breach of law is made by the assessee.

2. Similarly in contravention of the provisions of section 40 a(ia) the entire expenditure of interest on:-   Un-secured loans is disallowed and treated as income of the assessee.

The different tribunals and hon’ble high courts have given different rulings-some-where it has been held that the applicability of deductions of tax at source is applicable on payable amount of interest &others have held the applicability at both stages there must be finality in law making.

It may also be stated that generally interest is paid to such companies &financers who are regular assessee and account for in their income and there is no loss of revenue of the income of the government .

This section may be suitably amended.

H.L BEHAL, ABTI(LONDON) AUDITING, I.T.P

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