section 40 B

[mayank gupta]

sir if a entity has purchased goods worth Rs 35000 on credit and passed the entry

Purchase a/c Dr 35000 

     to Creditor A/C

and then the payment is made personally to the creditor by the proprietor

and then he passes the entry 

Creditor A/c.... Dr

    To Capital A/C

so this expense is allowed in section 40 B of Income Tax Act or not because the payment is settled in cash only , no payment is made by account payee cheque 

by

Mayank Gupta

AI Summary

Section 40A(3) of Income Tax Act: Cash Payment Restrictions Explored; Rule 6DD Exceptions May Apply to Credit Purchases An individual inquired about the applicability of Section 40A(3) of the Income Tax Act when an entity purchases goods worth Rs 35,000 on credit and the proprietor personally settles the payment in cash, without using an account payee cheque. A Chartered Accountant responded, suggesting that the situation might fall under the restrictions of the law but advised checking exceptions under Rule 6DD, which may provide relevant exemptions for cash transactions.