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! Clarified the Board by CIRCULAR NO. , Dated: March 29, 2006. 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.
Now the question is as to “who are the producers of livestock and meat and the evidence required to be furnished in this regard by the persons making the payments.”
Board (CBDT) has now clarified that any person, by whatever name called, who buys animals from the farmers, slaughters them and then sells the raw meat carcasses to the meat processing factories or to the traders/retail outlets would be considered as producer of livestock and meat.
Board has further stipulated that the benefit is subject to furnishing of the following:-
(i) A declaration from the person receiving the payment that he is a producer of meat;
(ii) A confirmation that the payment, otherwise than by an account payee cheque or account payee bank draft, was made on his insistence; and
(iii) A further confirmation from a veterinary doctor certifying that the person specified in the certificate is a producer of meat and that slaughtering was done under his supervision.
CIRCULAR NO. , Dated: October 6, 2006