Expenditure u/s 40A(3)

[Tax DEPTT]

A company is involved in Real Estate Business and it purchases land on which constructions activity is carried out and is sold in the form of flats. Certain amount of cash in excess of Rs. 20000/- has been paid against purchase of land. Finally, the land will not be capitalised in the books of accounts. Further, Please advise whether the same will be disallowed u/s40A(3) of the Income Tax Act, 1961. or not.

AI Summary

Real Estate Firm's Cash Payments for Land May Face Disallowance Under Section 40A(3); Explore Rule 6DD Exceptions. A company in the real estate business paid over Rs. 20,000 in cash for land purchases, which will not be capitalized in the accounts. The inquiry seeks advice on whether such payments would be disallowed under Section 40A(3) of the Income Tax Act, 1961. The response suggests exploring exceptions under rule 6DD to determine if the payments can be exempt from disallowance.