| Question And Answer | |
|---|---|
| Subject: | Whether Section 40A(3) is applicable in respect of payment made on account of wages ? |
| Category: | Income-Tax |
| Querist: | SURENDRA MEHTA, Advocate |
| Answered by: | Advocate Neelam Jadhav |
| Tags: | Business expenditure, cash payments, Rule 6DD, wages |
| Date: | July 16, 2021 |
Sir,
I have made cash payment of Rs. 16,000 and Rs.11,700 (payment above 10,000/- ) in a day to my workers on account of wages. Whether, this can be subject to addition u/s 40A(3). Kidly communicate supporting case law on the subject.Assessment Year 2019-20.
In Brothers Pharma (P.) Ltd. v. ITO (2016) 45 ITR 154/ [2017] 82 taxmann.com 234
(Jaipur)(Trib.) the Tribunal held that cash payment exceeding prescribed limits (Exceptional circumstances), where assessee paid salary in excess of Rs.20,000, in view of fact that employees insisted upon cash payments only and there was business expediency of assessee to pay in cash, the provision was held to be not applicable . followed Harshila Chordia (Smt0. v. ITO ( 2008 )298 ITR 349 ( Raj ) ( HC)
Rules 6DD clause (i) also refers that : no disallowance under sub-section (3) of section 40A shall be made: 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
(ii) does not maintain any account in any bank at such place or ship;
One has to verify whether Rule 6DD clause (i) is applicable to the facts of the case .
In Brothers Pharma (P.) Ltd. v. ITO (2016) 45 ITR 154/ [2017] 82 taxmann.com 234
(Jaipur)(Trib.) the Tribunal held that cash payment exceeding prescribed limits (Exceptional circumstances), where assessee paid salary in excess of Rs.20,000, in view of fact that employees insisted upon cash payments only and there was business expediency of assessee to pay in cash, the provision was held to be not applicable . followed Harshila Chordia (Smt0. v. ITO ( 2008 )298 ITR 349 ( Raj ) ( HC)
Rules 6DD clause (i) also refers that : no disallowance under sub-section (3) of section 40A shall be made: 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
(ii) does not maintain any account in any bank at such place or ship;
One has to verify whether Rule 6DD clause (i) is applicable to the facts of the case .