Depreciation on cash purchase asset of more than Rs.20000
This query is : Resolved
19 September 2009
Hi,
Our client has purchased a mmobile of Rs.23000 in cash, AS per income tax, this should be disallowed. Since its a Capital Expenditure, the disallownace of the same in not applicable. So let me know what to do for the same. Do i have to disallow the depriciation on the same ?
Our client has purchased a mmobile of Rs.23000 in cash, AS per income tax, this should be disallowed. Since its a Capital Expenditure, the disallownace of the same in not applicable. So let me know what to do for the same. Do i have to disallow the depriciation on the same ?
19 September 2009
Disallownace orgianate only in case of exp. debited in p&l a/c. Since it is the exp. of capital nature no disallowance can be made and no disallowance in respect of depreciation can be made .
However if it is debited to P&l a/c assuming as revenue nature then 100% of exp. will dieallowed.
However if it is debited to P&l a/c assuming as revenue nature then 100% of exp. will dieallowed.
19 September 2009
Section 40(A) earlier read as follows:
(3) Where the assessee incurs any expenditure51 in respect of which payment is made, after such date (not being later than the 31st day of March, 1969) as may be specified in this behalf by the Central Government by notification in the Official Gazette, in a sum exceeding [twenty] thousand] rupees otherwise than by [an account payee cheque drawn on a bank or account payee bank draft], [twenty per cent of such expenditure shall not be allowed as a deduction] :
The following sub-section (3) shall be substituted for the existing sub-section (3) of section 40A by the Finance Act, 2007, w.e.f. 1-4-2008 :
(3)(a) Where the assessee incurs any expenditure in respect of which payment is made in a sum exceeding twenty thousand rupees otherwise than by an account payee cheque drawn on a bank or account payee bank draft, no deduction shall be allowed in respect of such expenditure
SO EARLIER:
[twenty per cent of such expenditure shall not be allowed as a deduction]
AND NOW:
no deduction shall be allowed in respect of such expenditure
SO the position is this earlier expenditure was disallowed ......since capital expenditure was never allowed as expenditure , the question of disallowance did not arise.
BUT , now no deduction is to be allowed inrespect of such expendiuture. Depreciation is an deduction allowed in repect of capital expenditure made . Therefore , now if capital expenditure is incurred in excess of RS 20000/- i n cash , deduction in respect of such expenditure , i.e. depreciaiton may be disallowed
(3) Where the assessee incurs any expenditure51 in respect of which payment is made, after such date (not being later than the 31st day of March, 1969) as may be specified in this behalf by the Central Government by notification in the Official Gazette, in a sum exceeding [twenty] thousand] rupees otherwise than by [an account payee cheque drawn on a bank or account payee bank draft], [twenty per cent of such expenditure shall not be allowed as a deduction] :
The following sub-section (3) shall be substituted for the existing sub-section (3) of section 40A by the Finance Act, 2007, w.e.f. 1-4-2008 :
(3)(a) Where the assessee incurs any expenditure in respect of which payment is made in a sum exceeding twenty thousand rupees otherwise than by an account payee cheque drawn on a bank or account payee bank draft, no deduction shall be allowed in respect of such expenditure
SO EARLIER:
[twenty per cent of such expenditure shall not be allowed as a deduction]
AND NOW:
no deduction shall be allowed in respect of such expenditure
SO the position is this earlier expenditure was disallowed ......since capital expenditure was never allowed as expenditure , the question of disallowance did not arise.
BUT , now no deduction is to be allowed inrespect of such expendiuture. Depreciation is an deduction allowed in repect of capital expenditure made . Therefore , now if capital expenditure is incurred in excess of RS 20000/- i n cash , deduction in respect of such expenditure , i.e. depreciaiton may be disallowed
19 September 2009
Depreciation can not be dissallowed. Sec. 40A(3) not applicable.
20 September 2009
I am not clear till now. According to me depreciation should be disallowed. However i am unable to get the reference. Can any give reference for their replies ?
It will be of great help
It will be of great help
22 September 2009
I think 40A(3) starts with "ANY Expenditure" which means capital as well as revenue .
since the expenditure itself is not according to provisions of 40A(3) Rule 6DD , i think the question of depreciation doesnt arise .
since the expenditure itself is not according to provisions of 40A(3) Rule 6DD , i think the question of depreciation doesnt arise .
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