17 May 2010
DEAR EXPERTS I WISH GET CLEARED WHAT IS TREATMENT IN ASSESSSMENTS IN I.T. DEPARTMENT FOR BELOW POINTS
IF WE SELL OUR PRODUCT WHAT IS THE LIMIT OF CASH MEMO (BILLS FOR CASH PAYMENT) COULD IT GO BEYOND RS 20000.00 IF WE DRAW A BILL FOR CASH FOR RS 1 LAC WHAT CAN HAPPEN WITH ME OR WITH PURCHASER (WHEN ITO CATCHES THIS RECEIPT. AM I LIABLE TO DISCLOSE THE PAN OF BUYER. ALSO IF THE BUYER HAPPENS TO BE ONE TIME BUYER ONLY AND ONLY THE NAME IS GIVEN BY ME(ALSO I DONOT KNOW WHO HE WAS) WHAT DEPARTMENT MAXIMUM CAN DO ?
SIMILARLY IF WE PURCHASE GOODS IN CASH MEMO FOR RS 1 LAC WOULD IT BE DISALLOWED OR ALLOWED ?
SIMILARLY WHAT IS THE TREATMENT OF SIMILAR TRANSACTION IN CAPITAL GOODS PURCHASE SALE ?
WITH BEST REGARDS VIDYA SAGAR SHUKLA ACCOUNTS.PERFECTION@YAHOO.COM
17 May 2010
Yes any expenditurein respect of which of which payment in excess of Rs20,000/-is made otherwise than by an account payee cheque or account payee draft,100 percent of such expediture of such expenditure will not be allowable as deductions as perovisions of section 40(3) of the Income-Tax Act 1961.However subjects to Rule 6DD ,prescribes that there is exception in the case and circumstances in which payment in excess of Rs 20,000/-.
17 May 2010
In case of sales transaction the seller has no disallowance consequences in case the sale invoice(cash memo) exceeds the limit of Rs. 20000 since no deduction will be taken by the seller of such sale and consequently no disallowance can be made.
But the purchaser will be liable for disallowance since he has to take its deduction as a purchase.
If you have sold the goods to a person and you properly have issued the invoice that is sufficient. you need not to give the PAN No of every purchaser to whom you are selling the goods.
If you purchase goods for cash exceeding Rs 20000 it will be disallowed and the addition will be made.
No disallowance will be made in such case where the goods are capital goods since no deduction of capital goods is taken from the Profits of the assessee.
18 May 2010
Agree with Mr Amit Bjaj. provisions of section 40A(3) are not attracted in cash sales transactions as the provision is limited to allowability of "EXPENDITURE".
As far disallowance in the hands of buyer is concerned that depends upon the nature of expense in his hands and has no relevance to the seller.
For capital expeses in cash, as the same is not claimed as expediture, no disallowance u/s 40A(3) is called for. Please refer to circular no 34 dated 5-3-1970 relevant extract quoted below:
The provisions of section 40A(3) would apply in computing the income under the heads "profits and gains of business or profession" and "income from other sources" as per section 58(2) . All payments in excess of Rs. 2,500 at one time whether for goods or services, obtained for cash or credit, which are deductible in computing the income have to be made by a crossed cheque or bank draft. Thus, the price of goods purchased for resale or use in manufacturing processes or payments for services will be covered by the provisions of section 40A(3) . However, the section will not apply to repayment of loans or payment towards the purchase price of capital assets such as plant and machinery not for resale.