Section 40A(3)

Precaution to be Taken While Cash Transaction

Income Tax - I would like to highlight on a very important topics CASH TRANSACTION in business as well as other contexts. CASH Payment is common practice in business. Either in small or large business, CASH is very important part of business. Hence it is very important to understand and take precaution while making the payment to someone […]...

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Section 40A(3) / 40A(2) Non Deduction of Cash Expenses / payments to Relatives

Income Tax - Section 40A(3) was introduced by the Finance Act 1968 as a provision designed to counter evasion of tax through claims for expenditure shown to have been incurred in cash with a view to frustrating proper investigation by the Department as to the identity of the payee and the reasonableness of the payment....

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Expenses Disallowed under section 40A(3) and Section 40A(3A)

Income Tax - Section 40A(3) and Section 40A(3A) deals with Disallowance of 100% of expenditure if payment is made by any mode other than account-payee cheque or draft  in the year of expense or in the subsequent year / Years. Article explains provision of Section 40A(3) and Section 40A(3A) of Income Tax Act, 1961. Section 40A(3) of Income Tax [&hell...

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All About Disallowance under Section 40(A)(3)

Income Tax - Treatment of expenditures incurred by an assessee in excess of Rs. 20000/- (wef A.Y. 2018-19 Rs 10000/-) in cash or bearer cheque under section 40(A)(3) of the Income Tax Act, 1961...

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All you need to know about various provisions in relation to Cash transactions under Income tax Act

Income Tax - The Government of India with an intention to evade black money and to discourage the cash transactions time and again taking various steps. Specially the Income tax Act is amended and provided with disallowances and stringent penal provisions for various types of cash transactions. Let us briefly understand some of such provisions here....

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SIT report: Restrict Cash Transaction/Holding to curb black money

Income Tax - It is suggested that there should be a positive provision under the I.T. Act that any transaction involving more than Rs.3,00,000/– (Rupees Three Lacs) shall be invalid & illegal and would be a punishable offence, if amount is not paid by account payee cheque or account payee bank draft or use of electronic clearing system through a ban...

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Cash payment in excess of prescribed limit on bank/public holidays

Surya Merchants Ltd. Vs DCIT (ITAT Delhi) - Cash payments in excess of Rs. 20,000 made on bank/public holidays towards purchase of construction materials in the activity of real estate development could not be subjected to disallowance under section 40A(3) in view of rule 6DD(J)....

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Cash gifts & presents against section 40A(3) provisions not allowable

Ms. STEAG Energy Services (I) Pvt. Ltd. Vs ACIT (ITAT Delhi) - Assessee was not entitled to claim gifts and presents given to the customers by way of cash as business expenditure as the same was against the provisions contained u/s 40A(3)...

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Disallowance of cash purchase of jewellery u/s 40A(3) justified in case assessee failed to give explanation

Shri. Natesan Krishnamurthy Vs ITO (Madras High Court) - Since assessee failed to demonstrate that the conditions of the bid for purchase of gold jewellery required assessee to effect payments in cash and there was no explanation as to what stopped assessee from effecting payments through banking channel, therefore, AO was justified in disallowing the cas...

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No disallowance U/s. 40A(3) If Income computed by applying gross profit rate

Pr. CIT VS Jadau Jewellers & Manufactures (P) Ltd. (Rajasthan High Court) - When income of the assessee was computed by applying gross profit rate, there was no need to look into the provisions of section 40A(3), as applying the gross profit rate takes care of expenditure otherwise by way of cross cheque also. Following the same the action of Tribunal could not be held as u...

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Provisions of Section 68 Cannot be applied to Sundry Creditor

DCIT Vs Allied Infra suppliers (ITAT Cuttack) - The provisions of section 68 cannot be applied to sundry creditors and the assessee cannot be applied to sundry creditors and the assessee cannot be asked to prove the 3 ingredients of cash credits in respect of sundry creditors....

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Section 40A(3)’s Popular Posts

Recent Posts in "Section 40A(3)"

Cash payment in excess of prescribed limit on bank/public holidays

Surya Merchants Ltd. Vs DCIT (ITAT Delhi)

Cash payments in excess of Rs. 20,000 made on bank/public holidays towards purchase of construction materials in the activity of real estate development could not be subjected to disallowance under section 40A(3) in view of rule 6DD(J)....

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Cash gifts & presents against section 40A(3) provisions not allowable

Ms. STEAG Energy Services (I) Pvt. Ltd. Vs ACIT (ITAT Delhi)

Assessee was not entitled to claim gifts and presents given to the customers by way of cash as business expenditure as the same was against the provisions contained u/s 40A(3)...

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Disallowance of cash purchase of jewellery u/s 40A(3) justified in case assessee failed to give explanation

Shri. Natesan Krishnamurthy Vs ITO (Madras High Court)

Since assessee failed to demonstrate that the conditions of the bid for purchase of gold jewellery required assessee to effect payments in cash and there was no explanation as to what stopped assessee from effecting payments through banking channel, therefore, AO was justified in disallowing the cash purchase of jewellery under section 40...

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No disallowance U/s. 40A(3) If Income computed by applying gross profit rate

Pr. CIT VS Jadau Jewellers & Manufactures (P) Ltd. (Rajasthan High Court)

When income of the assessee was computed by applying gross profit rate, there was no need to look into the provisions of section 40A(3), as applying the gross profit rate takes care of expenditure otherwise by way of cross cheque also. Following the same the action of Tribunal could not be held as unjustified....

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Provisions of Section 68 Cannot be applied to Sundry Creditor

DCIT Vs Allied Infra suppliers (ITAT Cuttack)

The provisions of section 68 cannot be applied to sundry creditors and the assessee cannot be applied to sundry creditors and the assessee cannot be asked to prove the 3 ingredients of cash credits in respect of sundry creditors....

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Disallowance U/S 40A(3) not Possible if transaction genuine & cash payment done on Seller’s Insistence

DCIT Vs M/s. Brilliant Sare Reality Pvt. Ltd. (ITAT Indore)

When cash payment was done on insistence of the seller, amount was duly recorded in the sale deed and no doubt was raised with regard to the genuineness of the transaction, disallowance u/s 40A(3) not justifiable....

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No Section 40A(3) disallowance, if cash payment for purchase of agricultural land was due to commercial expediency

Prime Infra Developers (P) Ltd. Vs ITO (ITAT Delhi)

Disallowance under section 40A(3) with respect to cash payment made by assessee to farmers on Sunday for purchase of agricultural land could not be disallowed as Sunday was bank holiday and rule 6D(J)  was clearly attracted in assessees case as payment was made due to commercial expediency....

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No disallowance U/s. 40A(3) on Payment by debtor directly to creditor of assessee through banking channel

M/s. Lion Mercantile P. Ltd. Vs ITO (ITAT Mumbai)

Where assessee’s debtor directly made payment through banking channel to assessee’s creditor to square up their account, provisions of section 40A(3) would not be attracted....

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Cash payment cannot be disallowed if not claimed as business expense or capitalized

Kalyan Constructions Vs ITO (ITAT Hyderabad)

Kalyan Constructions Vs ITO (ITAT Hyderabad) Where assessee had not claimed cash payment of Rs. 1.50 crores for purchase of land as business expenditure or treated as stock or capitalized the same in order to claim depreciation in the future, disallowance under section 40A(3) could not be made. FULL TEXT OF THE ITAT JUDGMENT This [&hellip...

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S. 40A(3) Validity of Cash payments exceeding limit to Electricity Board

Ayub Ali Vs ACIT (ITAT Jaipur)

Ayub Ali Vs ACIT (ITAT Jaipur) The assessee has entered into an agreement with a Government Hospital in Bikaner whereby it operates the MRI and CT Scan machines. The nature of such activities therefore demand a continuous supply of electricity and the assessee cannot risk the life of the patients especially those admitted in emergency [&h...

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