section 40A(3) and Rule 6dd Applicability, Income Tax

[Bijendar singh]

As per section 40A(3) of Income Tax act, there is limitation of cash payment upto Rs. 35,000 for making payment for freight to Transporters. But as per memorandum of explanation for section 40A(3) and in many cases from reference to ITAT decisions main objective of bringing section 40A(3) is to counter the fake transactions. Now if one of the cases assessee is making cash payment to transporters more than Rs. 35000 considering the business neccessity and Assessee has taken confirmation of transporter by taking consent in writing from transporter and Pan No. as matter of proof....Could such cash transaction be allowed as expenditure neglecting provisions of section 40A(3)

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[CA GOPALJI AGRAWAL]

Since the case does not fall under exceptions mentioned under rule 6DD, it would not be allowable.