TaxTMI 
TaxTMI 
If I purchase Land in cash exceeding Rs.20000/-, whether it will be allowed or diasllowed (Payment is made to Non Governmenr persons/bodies). Please refer case laws, if any
Purchase of land in cash
21 Dec 2009 
4 Replies 
20197 Views Asked by
Cash payment restrictions under Section 40A(3) not bar capital asset purchases like land, but risks arise if treated as stock-in-trade.
Section 40A(3) constrains cash payments for business expenditure and may cause disallowance when payments are in cash to non account parties; purchase of land as a capital asset ordinarily falls outside that restriction because it is not business expenditure and land is not depreciable, though risk arises if land is treated as stock in trade or if an assessing officer extends the restriction to capital items eligible for depreciation; paying by account payee cheque reduces inquiry risk. (AI Summary)
Section 40A(3) constrains cash payments for business expenditure and may cause disallowance when payments are in cash to non account parties; purchase of land as a capital asset ordinarily falls outside that restriction because it is not business expenditure and land is not depreciable, though risk arises if land is treated as stock in trade or if an assessing officer extends the restriction to capital items eligible for depreciation; paying by account payee cheque reduces inquiry risk. (AI Summary)