Cash purchase payments qualify as expenditure under section 40A(3) and can be disallowed when paid above the statutory limit.

Payments made for purchases fall within the wide meaning of "expenditure" under section 40A(3) of the Income-tax Act and are not limited to overhead expenses covered by sections 30 to 43A. Cash payments for purchases, when made in sums exceeding the statutory limit, are therefore liable to disallowance under that provision. The question was answered in favour of the Revenue and against the assessee.

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Issues: Whether payments made for purchases fall within the expression "expenditure" in section 40A(3) of the Income-tax Act, 1961 and can be disallowed when made in cash in excess of the prescribed limit.

Analysis: The expression "expenditure" was held to be of wide import and not confined to overhead expenses under sections 30 to 43A. It extends to amounts considered in determining gross profit, including payments made for purchases. Such purchase payments, if made in cash in sums exceeding the statutory limit, are liable to disallowance under section 40A(3).

Conclusion: The question was answered in the negative, in favour of the Revenue and against the assessee.

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