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CA Intermediate · Taxation · Profits and Gains of Business or Profession

During tax year 2026-27, Ramesh Hardware, a trader in Indore, made the following cash payments, none of which fall under any exception: (a) ₹12,000 and ₹9,000 to Supplier A on the same day for goods purchased; (b) ₹30,000 to a transporter on one day for plying goods carriages hired for carrying goods; (c) ₹8,000 to Supplier B on one day. What amount is disallowed in computing business income for this restriction on cash payments?

The disallowance is ₹21,000. Cash payments to the same person on one day are added together, and Supplier A received ₹21,000, which is above the ₹10,000 daily limit, so the whole amount is disallowed. The transporter's ₹30,000 is within the ₹35,000 limit, and Supplier B's ₹8,000 is within ₹10,000.

  1. A₹21,000Correct
  2. B₹12,000
  3. C₹51,000
  4. D₹30,000

Explanation

Cash payments to one person in a day are aggregated, and the limit is ₹10,000 per day (₹35,000 for goods carriage hire). Supplier A received ₹21,000 on one day, which exceeds ₹10,000, so the whole ₹21,000 is disallowed. The transporter payment of ₹30,000 is within ₹35,000, and ₹8,000 to Supplier B is within ₹10,000. Disallowing only ₹12,000 is wrong because the whole aggregate is disallowed, not just one payment.

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