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.

[CAGOPALJI AGRAWAL]

Please find out the ways in exceptions mentioned in rule 6DD.

AI Summary

Cash payment limits under section 40A(3) can affect deductibility for land purchases; review rule 6DD exceptions. A real estate company made cash payments exceeding the statutory limit for land purchase; the key issue is whether such payments are disallowable under 40A(3). The advisory directs that applicability turns on the exceptions contained in rule 6DD, so deductibility depends on whether the payment meets those exception conditions.