EXPENSES PARTLY PAID IN BANKING CHANNEL AND PARTLY IN CASH

[KERAGODEGOPALARAO ANANTHARAO]

When An Expenditure is more than 10000 say 29000, I will discharge 20000 in banking channel and 9000 in cash, is it Not Attracted 40a(3).

[Padmanathan KV]

Sec. 40A (3) Where the assessee incurs any expenditure in respect of which a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, or use of electronic clearing system through a bank account or through such other electronic mode as may be prescribed, exceeds ten thousand rupees, no deduction shall be allowed in respect of such expenditure.

Payment of 9,000/- in cash will not attract the above provision. 

AI Summary

Cash payment threshold under section 40A(3) bars deduction when aggregate non-banking payments to a payee exceed the limit. Whether an expenditure partly paid via banking channel and partly in cash attracts the cash-payment restriction depends on the aggregate of payments made otherwise than by account-payee cheque, account-payee bank draft, or prescribed electronic modes to the same person in a day; only the non-banking component is compared to the statutory cash-payment threshold, so a cash amount below that threshold will not by itself disallow the deduction even if the remainder was paid through banking channels.