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2014 (4) TMI 566 - AT - Income TaxDeletion of disallowance u/s 40A(3) of the Act – Payments made to the MD –Amount paid for conversion from currency of small denomination into currency of higher denominations – balance represents the advance given for incurring expenditure on behalf of the company – Held that:- The payment made was for a definite purpose, i.e. return after due conversion into currency of higher denomination, so as to facilitate depositing of the same into bank account - at the point of time, when an advance is given for incurring the expenditure, there is no out go of funds of the company, and the actual outgo takes place only when expenditure is actually incurred by Sunil Reddy or such other person to whom he passes on such sums for incurring expenditure on behalf of the assessee - the provisions of S.40A(3) are not applicable even to the amounts of advance given by the assessee to Sunil Reddy or by Sunil Reddy to other employees for incurring expenditure on behalf of the assessee company. The process prior to actual incurring of expenditure or doing any act through the Managing Director or other employees is also recorded in the form of advances given, etc. - Unless and until the amount of advance is in fact spent towards any expenditure incurred on behalf of the assessee company, the money effectively do not go out of the coffers of the assessee company, and it is only the outgo of funds in the form of expenditure exceeding Rs. 20,000 in cash at a time, out of the coffers of the company, that attracts the provisions of S. 40A(3) of the Act - the amount has not been debited to the Profit & Loss Account – thus, the CIT(A) is justified in deleting the disallowance made by the AO u/s 40A(3) of the Act – order of the CIT(A) upheld – Decided against Revenue.
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