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TAX TALK- 21.09.2009-THE HITAVADA

TAX TALK
BY CA. NARESH JAKHOTIA
(Chartered Accountant)
“WHETHER EXPENDITURE IS DISALLOWABLE U/S 40A (3) IF AGGREGATE PAYMENT DONE AGAINST TWO DIFFERENT BILLS EXCEEDS RS. 20,000/-? ”

Query 1]
I want some clarification of Scope of section 40A (3) (As amended by the Finance Act-2008).
In the below mentioned case, if payment in a day of more than Rs. 20000 is made but against different LR/Bill, Whether It will be allowed or disallowed while computing taxable income of a company: -

Payee: Sai Transport
Bill / LR No.
Amt. Rs.
Time
Date
1.
15000/-
10 am
25th Sept
2.
18000/-
3 pm
25th Sept
Total payment made in a day is Rs. 33,000/- (Rs. 15000/-against Bill No. 1 & Rs. 18,000/- against Bill No. 2 at different time. Please give your comment considering scope of section 40A (3)? [sunil.kalbande@bilt.com]
Opinion:
Expenditure & payment of that expenditure in cash exceeding Rs. 20,000/- is necessary for disallowance u/s 40A(3).
Section 40A(3) of the Income Tax Act, 1961 reads as under: -”Where the assessee incu…

TAX TALK- 14.09.2009-THE HITAVADA

TAX TALK
BY CA. NARESH JAKHOTIA
(Chartered Accountant)


“CALCULATION OF TURNOVER - INTRA DAY TRADING IN SHARES & DERIVATIVES TRANSACTIONS”

Query 1]
Kindly clarify how the limit of Rs. 40 Lacs for compulsory audit of accounts would be applied in case of person doing trading in derivatives? How Sales, Turnover or Gross Receipts is to be calculated in such cases? How the turnover/ sales etc will be calculated in case of intra day trading in equities? Please elaborate the accounting aspects of the transactions. [k_kumar39@hotmail.com]
Opinion:

1. TURNOVER IN CASE OF DERIVATIVES: I] Accounting Aspects: a) In the case of derivatives, transactions are not recorded at the time of purchase/sale. b) Only the initial margin and mark-to-market margins are recorded as and when paid, and the profit or loss on the futures transactions is recorded as an income/expense on squaring up of the transaction or on expiry of the contract. II] Calculation of Turnover: a) The margin paid is certainly not the …