Direct & Indirect Taxes, Tax Ready Reckoner, Tax Management, Tax Act. & Rules, Tax Planning & Tax Savings.

Direct & Indirect Taxes, Tax Ready Reckoner, Tax Management, Tax Act. & Rules, Tax Planning & Tax Savings.

Rule 6DD – Exception to the [Section 40A(3)(a)] Payment in excess of Rs. 10,000

Rule 6DD – Exception to the [Section 40A(3)(a)] Payment in excess of Rs. 10,000
Rule 6DD – Exception to the [Section 40A(3)(a)] Payment in excess of Rs. 10,000
Rule 6DD prescribes the following Cases or Circumstances in which payment in excess of Rs. 10,000 may be made otherwise than by an Account Payee Cheque or Demand Draft. So no Disallowance will be made of the Expenditure even if the payment exceeding Rs. 10,000 otherwise than by an Account Payee Cheque or Demand Draft.

These exceptions are—

(a)           where the payment is made to—

(i)            the Reserve Bank of India or any banking company;

(ii)           the State Bank of India or any subsidiary bank;

(iii)          any co-operative bank or land mortgage bank;

(iv)          any primary agricultural credit society or any primary credit society;

(v)           the Life Insurance Corporation of India;

(b)          where the payment is made to the Government and, under the rules framed by it, such  payment is required to be made in legal tender;

(c)           where the payment is made by—

(i)            any letter of credit arrangements through a bank;

(ii)           a mail or telegraphic transfer through a bank;

(iii)          a book adjustment from any account in a bank to any other account in that or any other  bank;

(iv)          a bill of exchange made payable only to a bank;

(v)           the use of electronic clearing system through a bank account;

(vi)          a credit card;  (vii) a debit card.

(d)          where the payment is made by way of adjustment against the amount of any liability incurred  by the payee for any goods supplied or services rendered by the assessee to such payee;

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(e)          where the payment is made for the purchase of—

(i)            agricultural or forest produce; or

(ii)           the produce of animal husbandry (including livestock, meat, hides and skins) or dairy or  poultry farming; or

(iii)          fish or fish products; or

(iv)          the products of horticulture or apiculture,  to the cultivator, grower or producer of such articles, produce or products;

(f)           where the payment is made for the purchase of the products manufactured or processed  without the aid of power in a cottage industry, to the producer of such products;

(g)           where the payment is made in a village or town, which on the date of such payment is not  served by any bank, to any person who ordinarily resides, or is carrying on any business,  profession or vocation, in any such village or town;

(h)          where any payment is made to an employee of the assessee or the heir of any such employee,  on or in connection with the retirement, retrenchment, resignation, discharge or death of such  employee, on account of gratuity, retrenchment compensation or similar terminal benefit and  the aggregate of such sums payable to the employee or his heir does not exceed fifty  thousand rupees;

(i)            where the payment is made by an assessee by way of salary to his employee after deducting  the income-tax from salary in accordance with the provisions of section 192 of the Act, and  when such employee—

(i)            is temporarily posted for a continuous period of fifteen days or more in a place other  than his normal place of duty or on a ship; and

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(ii)           does not maintain any account in any bank at such place or ship;

(j)            where the payment was required to be made on a day on which the banks were closed either  on account of holiday or strike;

(k)           where the payment is made by any person to his agent who is required to make payment in  cash for goods or services on behalf of such person;

(l)           where the payment is made by an authorised dealer or a money changer against purchase of foreign currency or travellers cheques in the normal course of his business.

Note :

1.            The provisions of the Section do not apply to repayment of loans or payment towards the purchase price  of capital assets such as plant and machinery not for resale.

2.            The provisions of section 40A(3) are applicable only in computing income under the heads ‘Profits and  Gains of Business or Profession’ and ‘income from other sources’.

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