Seeking clarification for Form 10B audit regarding cash/electronic payment classification:
A charitable Trust paid Rs. 5,000/- to Staff Y via bank transfer. Staff Y who then paid the Vendor Rs. 5,000/- in cash for purchase of stationery.
Question:
For Form 10B reporting
Is the final Rs. 5,000/- payment to the Vendor considered an ‘electronic’ transaction (due to the initial bank transfer from the Trust), or a ‘cash’ transaction ?
Gopi, it is not payment but expenditure which the organization is charging to books which matters. See 40(A3) below:
Section 40A(3) in The Income Tax Act, 1961
(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 payee cheque drawn on a bank or account payee bank draft, or use of electronic clearing system through a bank account 68[or through such other electronic mode as may be prescribed69], exceeds ten thousand rupees, no deduction shall be allowed in respect of such expenditure.
Thank you for your response, my question was whether to treat cash or electronic payment with the example I have given . This is needed for form 10b audit report.