Yogi Saraf (Audits & Taxation) (86 Points)
28 February 2011I would like to know if payment for purchase of a depreciable asset exceeding 20000 is made in cash, would provisions of Sec 40A(3) be invoked on the depreciation claimed on the asset...
pls throw light on the matter...if possible with citations
Pursuing CA
(Working)
(149 Points)
Replied 28 February 2011
Dear Yogi,
Section 40A(3) is applicable even if an assessee purchase a depreciable assets, depreciation will be disallowed by virtue of section 40A(3), (please refer point 5 of para 49.3 of ready reckoner).
CA Akshay Kumar Mishra
(Chartered Accountant )
(1784 Points)
Replied 28 February 2011
No it is not applicable on Purchase of fixed assets or any other depreciatable assets.
section 40A(3) : expenditure ( other than capital assets) incurred in excess of2000 not by an A/c payee cheque or bank draft in respect of which a payment/ aggregate of payment made to a person in a day shall not be allowed to be reduced as expense while calculating PGBP income
Amit Gupta
(Loosening Myself)
(1508 Points)
Replied 28 February 2011
| Originally posted by : Yogi Saraf | ||
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I would like to know if payment for purchase of a depreciable asset exceeding 20000 is made in cash, would provisions of Sec 40A(3) be invoked on the depreciation claimed on the asset... pls throw light on the matter...if possible with citations |
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No it is not applicable to purchase of Capital asset
Yogi Saraf
(Audits & Taxation)
(86 Points)
Replied 01 March 2011
@ Amit & Akshay,
i have some citations namely ''Janta Metal Supply Co. v/s CIT (1991) 100 CTR (All.) 52'' wherein it is stated no deduction u/s 30 to 37 would be available when payment exceeding Rs.20000 is made in cash, and as depreciation (sec 32) comes under this ambit, disallowance is warranted.
sachin sharma
(article)
(122 Points)
Replied 01 March 2011
Hi Yogi,
Section 40A(3) is applicable even if an assessee purchases a depreciable assest. For instance, If X purchases a car for business purpose and payment (say, Rs. 4.5 lacs ) made in cash, depreciation will be disallowed by virtue of section 40A(3).
no it is not applicable bcause , here the assess is not claiming any deduction on the payment made , there is indirect claim by way of depriciation and that cant be disallowed on that ground
this provision shall not apply in respect of expenditure for which no deduction is claimed namely capital expenditure .
| Originally posted by : Pursuing CA | ||
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Dear Yogi, Section 40A(3) is applicable even if an assessee purchase a depreciable assets, depreciation will be disallowed by virtue of section 40A(3), (please refer point 5 of para 49.3 of ready reckoner). |
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WRONG PLZ CONFIRM BEFORE TELLING ...HOWEVER IF THE CAPITAL EXPENDITURE IS PURCHASE FOR THE SCIENTFIC RESERCH THEN SEC . 40 A (3) COMES IN PLAY AS THE ASSESS IS SUPPOSE TO CLAIM IT AS A DEDUCTION DIRECTLY
rk_26_2000@yahoo.com
(rk_26_2000@yahoo.com)
(53 Points)
Replied 01 March 2011
Good question...as per my understanding section 40 a 3 talks about expenditure.....it has to be revenue in nature since capital expenditure is not debited to p/l account.purchase of assest is capital in nature so its not hitting there.only exceptions BEING Rule 6DD.Deprecition is independent of the said provision,wherein the relavant section 31 which talks about Depreciton do not talk about any disallowance.
correct me
Manmohan ACA, CS
(Chartered Accountant )
(14243 Points)
Replied 01 March 2011
| Originally posted by : RADHEKRISHNA0001 | ||
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it is not applicable to purchase of Capital asset |
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Vinod Gupta also endorse the same view
vipul maheshwari
(CA FINAL )
(44 Points)
Replied 04 March 2011
Sec 40A(3) clearly says when an assessee incurs an expenditure
in your case assessee is not incuring an expenditure because depriciation is non cash expenses.
Therefore 40A(3) is not applicable to you
Pursuing CA
(Working)
(149 Points)
Replied 05 March 2011
Dear Yogi,
Please refer para 49.3 point 5 of Direct Tax ready reckoner of Dr. V.K Singhania. the depriciation will be disallowed.
Ashok J
(CA Final)
(880 Points)
Replied 05 March 2011
Sec 40 A 3 strictly says payments in excess of Rs 20000 towards revenue exp...so its not applicable for purchase of Fixed assets
Kalpesh
(Consultant)
(21 Points)
Replied 06 September 2011
Just add on - as per Act once the assets enters the block its looses its identity and hence its impossible to exclude the depreciation peratining to specific assets.
CAclubindia
