Payment over Rs. 20,000/- in cash – livestock not covered
As per the Income Tax Act, if payment of a sum more than twenty thousand is made otherwise than by a crossed cheque or draft, 20% of the expenditure is not allowed as deduction. But there is an exception; payment made to the producer for the purchase of the produce of "animal" husbandry (including hides and skins). Is this allowed for livestock? Yes! Clarifies the Board. The expression 'the produce of animal husbandry' would include ?livestock and meat? and in a case where payment exceeding rupees twenty thousand is made to a producer of the products of animal husbandry (including livestock, meat, hides and skins) otherwise than by a crossed cheque drawn on a bank or by a crossed bank draft for the purchase of such produce, no disallowance should be attracted. However the Board clarifies that the exception will not be available on the payment for the purchase of livestock, meat, hides and skins from a person who is not proved to be the producer of these goods and is only a trader, broker or any other middleman by whatever name called.
CBDT CIRCULAR NO. 4/2006, Dated: March 29, 2006