26[27Cases and circumstances in which payment in a sum exceeding 28[twenty thousand] rupees may be made otherwise than by a crossed cheque drawn on a bank or by a crossed bank draft.

6DD. No disallowance under sub-section (3) of section 40A shall be made where any payment29 in a sum exceeding 28[twenty thousand] 30rupees is made otherwise than by a crossed cheque drawn on a bank or by a crossed bank draft in the cases and circumstances specified hereunder, namely :—

(a) where the payment is made to—

(i) the Reserve Bank of India or any banking company31 as defined in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949) ;

(ii) the State Bank of India or any subsidiary bank32 as defined in section 2 of the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959) ;

(iii) any co-operative bank or land mortgage bank ;

(iv) any primary agricultural credit society as defined in clause (cii) of section 2 of the Reserve Bank of India Act, 1934 (2 of 1934), or any primary credit society as defined in clause (civ) of that section ;

(v) the Life Insurance Corporation of India established under section 3 of the Life Insurance Corporation Act, 1956 (31 of 1956) ;

(vi) the Industrial Finance Corporation of India established under section 3 of the Industrial Finance Corporation Act, 1948 (15 of 1948) ;

(vii) the Industrial Credit and Investment Corporation of India Ltd. ;

(viii) the Industrial Development Bank of India established under section 3 of the Industrial Development Bank of India Act, 1964 (18 of 1964) ;

(ix) the Unit Trust of India established under section 3 of the Unit Trust of India Act, 1963 (52 of 1963) ;

(x) the Madras Industrial Investment Corporation Ltd., Madras ;

(xi) the Andhra Pradesh Industrial Development Corporation Ltd., Hyderabad ;

(xii) the Kerala State Industrial Development Corporation Ltd., Trivandrum ;

(xiii) the State Industrial and Investment Corporation of Maharashtra Ltd., Bombay ;

(xiv) the Punjab State Industrial Development Corporation Ltd., Chandigarh ;

(xv) the National Industrial Development Corporation Ltd., New Delhi ;

(xvi) the Mysore State Industrial Investment and Development Corporation Ltd., Bangalore ;

(xvii) the Haryana State Industrial Development Corporation Ltd., Chandigarh ;

(xviii) any State Financial Corporation established under section 3 of the State Financial Corporations Act, 1951 (63 of 1951) ;

33(b) where the payment is made to Government and, under the rules framed by it, such payment is required to be made in legal tender ;

34(c) where under any contract entered into by the assessee before the 1st day of April, 1969, the payment is required to be made in legal tender ;

(d) where the payment is made by—

(i) any letter of credit arrangements through a bank ;

(ii) a mail or telegraphic transfer through a bank ;

(iii) a book adjustment from any account in a bank to any other account in that or any other bank ;

(iv) a bill of exchange made payable only to a bank.

Explanation : For the purposes of this clause and clause (h), the term “bank” means any bank, banking company or society referred to in sub-clauses (i) to (iv) of clause (a) and includes any bank [not being a banking company35 as defined in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949)], whether incorporated or not, which is established outside India ;

36(e) where the payment is made by way of adjustment against the amount of any liability incurred by the payee for any goods supplied or services rendered by the assessee to such payee ;

37(f) where the payment is made for the purchase of—

(i) agricultural or forest produce ; or

(ii) the produce of animal husbandry (including hides and skins) or dairy or poultry farming ; or

(iii) fish or fish products ; or

(iv) the products of horticulture or apiculture,

to the cultivator, grower or producer of such articles, produce or products;

(g) where the payment is made for the purchase of the products manufactured or processed without the aid of power in a cottage industry, to the producer of such products;

(h) where the payment is made in a village or town, which on the date of such payment is not served by any bank, to any person who ordinarily resides, or is carrying on any business, profession or vocation, in any such village or town;

(i) where any payment by way of gratuity, retrenchment compensation or similar terminal benefit, is made to an employee of the assessee or the heirs of any such employee on or in connection with the retrenchment, resignation, discharge or death of such employee, if the income chargeable under the head “Salaries” of the employee in respect of the financial year in which such retirement, resignation, discharge or death took place or the immediately preceding financial year did not exceed Rs. 7,50038;

39[(j) where the payment is made by an assessee by way of salary to his employee after deducting the income-tax from salary in accordance with the provisions of section 192 of the Act, and when such employee—

(A) is temporarily posted for a continuous period of fifteen days or more in a place other than his normal place of duty or on a ship; and

(B) does not maintain any account in any bank at such place or ship;

40(k) where the payment was required to be made on a day on which the banks were closed either on account of holiday or strike;

(l) where the payment is made by any person to his agent who is required to make payment in cash for goods or services on behalf of such person.]]

40a[(m) where the payment is made by an authorised dealer or a money changer against purchase of foreign currency or travellers cheques in the normal course of his business.

Explanation : For the purpose of this clause, the expression “authorised dealer” or “money changer” means a person authorised as an authorised dealer or money changer to deal in foreign currency or foreign exchange under any law for the time being in force.]