SEC 40A(3)

[KUMAR Narasimhan]

Dear Sir/Madam,

Please clarify the below Query u/s 40A(3)

Mr. X purchased goods on credit on 01.08.2017 for ₹ 29,000. He makes payment of bills as follows:- On 02.08.2017 ₹ 10,000 On 03.08.2017 ₹ 9,000 On 04.08.2017 ₹ 10,000.

He made all 3 bills through cash payment.

Whether such an expenditure shall be allowed or disallowed u/s 40A(3)?

[DR.MARIAPPAN GOVINDARAJAN]

In my view allowed.

AI Summary

Cash payments under section 40A(3) treated as allowable where prompt sequential cash settlements follow a credit purchase.
A query whether cash payments made in three successive days immediately after a credit purchase are disallowable under section 40A(3); the forum reply concluded the expenditure is allowable, treating the prompt sequential cash settlements following the credit purchase as not attracting disallowance.