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9. Amendment of section 40A. |
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In section 40A of the Income-tax Act, for sub-section (3), the following sub-sections shall be substituted, with effect from the 1st day of April, 2009, namely:
"(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 payeee cheque drawn on a bank or account payeee bank draft, exceeds twenty thousand rupees, no deduction shall be allowed in respect of such expenditure.
(3A) Where an allowance has been made in the assessment for any year in respect of any liability incurred by the assessee for any expenditure and subsequently during any previous year (hereinafter referred to as subsequent year) the assessee makes payment in respect thereof, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, 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 twenty 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 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 payeee 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..
Clause 9 seeks to amend section 40A of the Income-tax Act, relating to expenses or payments not deductible in certain circumstances.
Under the existing provisions contained in clause (a) of sub-section (3) of the said section any expenditure incurred in respect of which payment is made in a sum exceeding Rs. 20,000 otherwise than by an account payee cheque drawn on a bank or by an account payee bank draft is not allowed as a deduction. Clause (b) of sub-section (3) of section 40A also provides for deeming a payment as profits and gains of business or profession if the payment is made in any subsequent year in a sum exceeding Rs. 20,000 otherwise than by an account payee cheque drawn on a bank or by an account payee bank draft.
The amendment seeks to substitute the said sub-section (3) with sub-sections (3) and (3A). The proposed sub-section (3) provides that 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 proposed sub-section (3A) provides that where an allowance has been made in the assessment for any year in respect of any liability incurred by the assessee for any expenditure and subsequently during any previous year (hereinafter referred to as subsequent year) the assessee makes payment in respect thereof, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, 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 twenty thousand rupees.
It is also proposed to provide that no disallowance shall be made and no payment shall be deemed to be the profits and gains of business or profession under sub-sections (3) and (3A) 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 proposed amendment will take effect from the 1st day of April, 2009 and will, accordingly, apply in relation to the assessment year 2009-10 and subsequent assessment years.
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