Examination fee paid by college in excess of Rs - 10000 through account of another person

[SUBAIR MADAKKAL]

Is examination fee paid by a college through an office staff of the college attracts 40A ? Please answer. This amount can only be paid through SBI Account.

[Padmanathan KV]

Can you elaborate the query? who is claiming deduction of payment? what is the mode of payment? why is it being paid through office staff and how was it paid to office staff?

[SUBAIR MADAKKAL]

Dear Sir

Assessee is the self-finance college affiliated to University of Calicut. They can only pay the examination fee from State Bank of India. While making the payment, they have paid the examination fee from their office staff account instead of making from their own account due to some technical issues. For the said examination fee payment they have paid cash in return to the office staff. Hence, the college can account the payment only through cash account. This is my question. This cash payment will attract the disallowance u/s 40A ?

[Padmanathan KV]

Sir,
Strictly speaking it will attract Section 40A. However, if the University of Calicut can be considered falling within the wider meaning of "Government", it may be possible to shelter under Rule 6DD Clause (b) where the payment is made to the Government and, Under the rules framed by it, such payment is required to be made in legal tender;   

AI Summary

Tax disallowance for cash payments made through staff accounts may apply, with narrow exception for government payments under prescribed rules. A college paid university examination fees through an office staff member's bank account and reimbursed that staff member in cash. Such cash reimbursement ordinarily attracts a tax disallowance for payments not made by prescribed modes, but a possible exception may apply if the university is treated as Government and the payment falls within rules that permit legal tender payments to government bodies.