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

Section 40A(3) prohibits cash payments over Rs. 35,000 for freight, exceptions in Rule 6DD not applicable. A query was raised regarding the applicability of Section 40A(3) of the Income Tax Act, which limits cash payments for freight to transporters to Rs. 35,000, aimed at preventing fake transactions. The question concerned whether cash payments exceeding this amount, made out of business necessity with written consent and PAN confirmation from the transporter, could be allowed as expenditure. The response clarified that such transactions would not be allowable as they do not fall under the exceptions provided in Rule 6DD.