TaxTMI 
TaxTMI 
Expenses or payments not deductible in certain circumstances
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...., 2016] no disallowance, on account of any expenditure being excessive or unreasonable having regard to the fair market value, shall be made in respect of a specified domestic transaction referred to in section 92BA, if such transaction is at arm's length price as defined in clause (ii) of section 92F.] ^3[****] (b) The persons referred to in clause (a) are the following, namely :- (i) where the assessee is an individual, any relative of the assessee; (ii) where the assessee is a company, firm, association of persons or Hindu undivided family any director of the company, partner of the firm, or member of the association or family, or any relative of such director, partner or member; (iii) any individual who has a substantial interest in the business or profession of the assessee, or any relative of such individual; (iv) a company, firm, association of persons or Hindu undivided family having a substantial interest in the business or profession of the assessee or any director, partner or member of such company, firm, association or family, or any relative of such director, partner or member, ^29[or any other company carrying on business or professio....
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....ccount payee cheque drawn on a bank or account payee bank draft ^32[or use of electronic clearing system through a ^39[bank account or through such other electronic mode as may be prescribed]], the payment so made shall be deemed to be the profits and gains of business or profession and accordingly chargeable to income-tax as income of the subsequent year if the payment or aggregate of payments made to a person in a day, exceeds ^33[ten thousand rupees]: Provided that no disallowance shall be made and no payment shall be deemed to be the profits and gains of business or profession under sub-section (3) and this subsection where 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, ^34[or use of electronic clearing system through a ^39[bank account or through such other electronic mode as may be prescribed], exceeds ten thousand rupees,] in such cases and under such circumstances as may be prescribed, having regard to the nature and extent of banking facilities available, considerations of business expediency and other relevant factors.] ^26[Provided further that in the case of payme....
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....or formation of, or as contribution to, any fund, trust, company, association of persons, body of individuals, society registered under the Societies Registration Act, 1860 (21 of 1860), or other institution for any purpose, except where such sum is so paid, for the purposes and to the extent provided by or under clause (iv) ^27[or clause (iva)] or clause (v) of sub-section (1) of section 36, or as required by or under any other law for the time being in force. (10) Notwithstanding anything contained in sub-section (9), where the ^22[Assessing] Officer is satisfied that the fund, trust, company, association of persons, body of individuals, society or other institution referred to in that sub-section has, before the 1st day of March, 1984, bona fide laid out or expended any expenditure (not being in the nature of capital expenditure) wholly and exclusively for the welfare of the employees of the assessee referred to in sub-section (9) out of the sum referred to in that sub-section, the amount of such expenditure shall, in case no deduction has been allowed to the assessee in respect of such sum and subject to the other provisions of this Act, be deducted in computing the income r....
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....tuted vide Section 15 of the Finance (No. 2) Act, 1996 w.e.f. 01-04-1997 before it was read as, "ten" 6. Substituted vide Section 9 of the Taxation Laws (Amendment) Act, 2006 w.e.f. 13-07-2006 before it was read as, "a crossed cheque drawn on a bank or by a crossed bank draft" 7. Substituted vide Section 11 of the Finance Act, 1995 w.e.f. 01-04-1996 before it was read as, "such expenditure shall not be allowed as a deduction" 8. Substituted vide Section 14 of the Direct Tax Laws (Amendment) Act, 1987 w.e.f. 01-04-1989 before it was read as, "two thousand five hundred" 9. Substituted vide Section 15 of the Finance (No. 2) Act, 1996 w.e.f. 01-04-1997 before it was read as, "ten" 10. Substituted vide Section 9 of the Taxation Laws (Amendment) Act, 2006 w.e.f. 13-07-2006 before it was read as, "a crossed cheque drawn on a bank or by a crossed bank draft" 11. Substituted vide Section 2 of the Direct Tax Laws (Amendment) Act, 1987 w.e.f. 01-04-1988 before it was read as, "Income-tax" 12. Substitute....
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....-clause (ii) of this clause or the aggregate referred to in the foregoing proviso, the following shall not be taken into account, namely :- (i) the value of any travel concession or assistance referred to in clause (5) of section 10; (ii) passage moneys or the value of any free or concessional passage referred to in sub-clause (i) of clause (6) of section 10; (iii) any payment referred to in clause (iv) or clause (v) of sub-section (1) of section 36; (iv) any expenditure referred to in clause (ix) of sub-section (1) of section 36. (b) Nothing in clause (a) shall apply to any expenditure or allowance in relation to - (i) any employee in respect of any period of his employment outside India; (ii) any employee being an individual referred to in sub-clause (vii) or sub-clause (viia) of clause (6) of section 10 in respect of any period during which he is entitled to the exemption under sub-clause (vii) or, as the case may be, sub-clause (viia) aforesaid; (iii) any employee whose income chargeable under the head "Salaries" is seven thousand and five hundred rupees or less. (c) The limits referred to in claus....
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.... may be, the former employee. Explanation 2 : In this sub-section, - (a) "salary" has the meaning assigned to it in clause (1) read with clause (3) of section 17 subject to the following modifications, namely :- (1) in the said clause (1), the word "perquisites" occurring in sub-clause (iv) and the whole of sub-clause (vii) shall be omitted; (2) in the said clause (3), the references to "assessee" shall be construed as references to "employee or former employee" and the references to "his employer of former employer" and "an employer or a former employer" shall be construed as references to "the assessee"; (b) "perquisite" means - (i) rent-free accommodation provided to the employee by the assessee; (ii) any concession in the matter of rent respecting any accommodation provided to the employee by the assessee; (iii) any benefit or amenity granted or provided free of cost or at concessional rate to the employee by the assessee; (iv) payment by the assessee of any sum in respect of any obligation which, but for such payment, would have been payable by the employee; and (v) payment by ....
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....he purpose of payment of any gratuity, that has become payable during the previous year; (ii) any provision made by the assessee for the previous year relevant to any assessment year commencing on or after the 1st day of April, 1973, but before the 1st day of April, 1976, to the extent the amount of such provision does not exceed the admissible amount, if the following conditions are fulfilled, namely :- (1) the provision is made in accordance with an actuarial valuation of the ascertainable liability of the assessee for payment of gratuity to his employees on their retirement or on termination of their employment for any reason; (2) the assessee creates an approved gratuity fund for the exclusive benefit of his employees under an irrevocable trust, the application for the approval of the fund having been made before the 1st day of January, 1976; and (3) a sum equal to at least fifty per cent of the admissible amount, or where any amount has been utilised out of such provision for the purpose of payment of any gratuity before the creation of the approved gratuity fund, a sum equal to at least fifty per cent of the admissib....
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.... not include any amount received by the company - (i) from the Central Government or any State Government or any local authority, or from any other source where the repayment of the amount is guaranteed by the Central Government or a State Government; (ii) from the Government of a foreign State, or from a citizen of a foreign State, or from any institution, association or body (whether incorporated or not) established outside India; (iii) as a loan from a banking company or from a co-operative society engaged in carrying on the business of banking (including a co-operative land mortgage bank or a co-operative land development bank); (iv) as a loan from any institution or body specified in the list in the Tenth Schedule or such other institution or body as the Central Government may, having regard to the nature and objects of the institution or body, by notification in the Official Gazette, specify in this behalf; (v) from any other company; (vi) from an employee of the company by way of security deposit; (vii) by way of security or as an advance from any purchasing agent, selling agent or other agent in the course of, o....
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.... section 620A of the Companies Act, 1956 (1 of 1956), to be a Nidhi or Mutual Benefit Society; (vi) a miscellaneous finance company, that is to say, a company which carries on exclusively, or almost exclusively, two or more classes of business referred to in the preceding sub-clauses." Earlier, Inserted vide Section 6 of the Finance Act, 1975 w.e.f. 01-04-1976 21. Inserted Section 10 of the Finance Act, 1984 w.e.f. 01-04-1980 22. Substituted vide Section 2 of the Direct Tax Laws (Amendment) Act, 1987 w.e.f. 01-04-1988 before it was read as, "Income-tax" 23. Inserted Section 10 of the Finance Act, 1984 w.e.f. 01-04-1980 24. Omitted vide Section 17 of the Finance Act, 1992 w.e.f. 01-04-1993 before it was read as, "(12) No deduction shall be allowed in excess of ten thousand rupees for any assessment year in respect of any expenditure incurred by the assessee by way of fees or other remuneration paid to any person (other than an employee of the assessee), - (a) for services (not being services by way of preparation of return of income) in connection with any proceedin....
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....ified in this behalf by the Central Government by notification in the Official Gazette, in a sum exceeding ^4[^5[twenty] thousand] rupees otherwise than by ^6[an account payee cheque drawn on a bank or account payee bank draft],^7[twenty per cent of such expenditure shall not be allowed as a deduction] Provided that where an allowance has been made in the assessment for any year not being an assessment year commencing prior to the 1st day of April, 1969, in respect of any liability incurred by the assessee for any expenditure and subsequently during any previous year the assessee makes any payment in respect thereof in a sum exceeding ^8[^9[twenty] thousand] rupees otherwise than by ^10[an account payee cheque drawn on a bank or account payee bank draft], the allowance originally made shall be deemed to have been wrongly made and the ^11[Assessing] Officer may recompute the total income of the assessee for the previous year in which such liability was incurred and make the necessary amendment, and the provisions of section 154 shall, so far as may be, apply thereto, the period of four years specified in sub-section (7) of that section being reckoned from the end of the ass....