IT_Applicability of Sec.40A(3) read with Rule 6DD
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OM PRAKASH AGARWAL
Nov 30, 2016, 1:05:44 AM11/30/16
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Dear Professional Colleagues,
I would request you all to share your views on allow-ability or disallow-ability under section 40A(3) of Income Tax Act, 1961 read with Rule 6DD of Income Tax Rules, 1962 of payments exceeding Rs.20,000/- made in CASH to - say - Kolkata Municipal Corporation on account of Municipal Tax.
Although every tax professional knows the contents of the above reffered section and rule, still I quote hereunder the relevant portions thereof :
Section 40A(3) : Where the assessee incurs any expenditure in respect of which 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, exceeds twenty thousand rupees, no deduction shall be allowed in respect of such expenditure.
The proviso below section 40A(3A) reads as follows :
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 sub-section 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, exceeds twenty 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.
The relevant portion of rule 6DD, i.e., sub-rule (b) reads as follows :
Your views may please be expressed in light of the above legal provisions considering -
(i) whether Kolkata Municipal Corporation is covered by the term 'Government' used in Rule 6DD(b) and
(ii) even if reply to Q. (i) is in affirmative, whether Kolkata Municipal Corporation has made any rule that Municipal Taxes have to be paid in legal tender.
his query is independent of provisions of section 43B of the Income Tax ASct, 1961.
CA O. P. Agarwal
98302 17440
I would request you all to share your views on allow-ability or disallow-ability under section 40A(3) of Income Tax Act, 1961 read with Rule 6DD of Income Tax Rules, 1962 of payments exceeding Rs.20,000/- made in CASH to - say - Kolkata Municipal Corporation on account of Municipal Tax.
Although every tax professional knows the contents of the above reffered section and rule, still I quote hereunder the relevant portions thereof :
Section 40A(3) : Where the assessee incurs any expenditure in respect of which 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, exceeds twenty thousand rupees, no deduction shall be allowed in respect of such expenditure.
The proviso below section 40A(3A) reads as follows :
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 sub-section 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, exceeds twenty 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.
The relevant portion of rule 6DD, i.e., sub-rule (b) reads as follows :
| (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. |
Your views may please be expressed in light of the above legal provisions considering -
(i) whether Kolkata Municipal Corporation is covered by the term 'Government' used in Rule 6DD(b) and
(ii) even if reply to Q. (i) is in affirmative, whether Kolkata Municipal Corporation has made any rule that Municipal Taxes have to be paid in legal tender.
his query is independent of provisions of section 43B of the Income Tax ASct, 1961.
CA O. P. Agarwal
98302 17440
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