section 40A(3) and Rule 6dd Applicability

[Bijendar singh]

As per section 40A(3) of Income Tax act, there is limitation of cash payment upto Rs. 35,000 for making payment for freight to Transporters. But as per memorandum of explanation for section 40A(3) and in many cases from reference to ITAT decisions main objective of bringing section 40A(3) is to counter the fake transactions. Now if one of the cases assessee is making cash payment to transporters more than Rs. 35000 considering the business neccessity and Assessee has taken confirmation of transporter by taking consent in writing from transporter and Pan No. as matter of proof....Could such cash transaction be allowed as expenditure neglecting provisions of section 40A(3)

[CAGOPALJI AGRAWAL]

Since the case does not fall under exceptions mentioned under rule 6DD, it would not be allowable.

AI Summary

Limit on cash payments to transporters may render expenditure disallowable absent Rule 6DD exceptions, despite written consent. A taxpayer queried whether cash payments to transporters exceeding the statutory ceiling can be allowed as business expenditure when supported by written consent and PAN. The headnote explains that section 40A(3) restricts deductions for such cash payments to prevent fake transactions, and that unless the payment qualifies under the exemptions in Rule 6DD, the expenditure is vulnerable to disallowance despite written confirmation and PAN.