As per Section 40(A)(3) if any assest purchased by way of cash exceeding more than Rs. 20,000/- then depreciation on that is diallowed in that year. My Question is whether in subsequent year depreciation is allowable on that assest????
48 Replies
CA Dhiraj Ramchandani
(CA, M. com)
(10823 Points)
Replied 17 November 2009
How can u disallow depreciation for any year to be charged???
Sec 40 (a) (3) applies only to items which are debited to p& l , however purchase of fixed asset is not debited to P & l . And if v talk about depreciation, then depreciaiton is charged on assets hold by the assesse even if he is not the owner of the asset. u cn disallow an expenditure only if otherwise it is allowed.
So i think sec 40 (a) (3) does not disallow the depreciation to be charged on such assets.
Nywz, lets other also comment on this
CA Gaurav Makwana
(Partner)
(126 Points)
Replied 17 November 2009
sorry for your knowledge section 40(A)(3) refers to any expenditure irrespective of whether capital or revenue nature. i don't agree with your comment...........refer section 40(A)3 properly and then answer.....
CA Dhiraj Ramchandani
(CA, M. com)
(10823 Points)
Replied 17 November 2009
Gaurav, in my knowledge... "DEPRECIATION CAN'T BE DISALLOWED"...
CA Prateek Garg
(CA in Practice)
(1447 Points)
Replied 17 November 2009
according to me dhruv is right.
first look at the statement of sec40.A(3)
Section 40A(3)(a) of the Income-tax Act, 1961 provides that any expenditure incurred in respect of which payment is made in a sum exceeding Rs.20,000/- otherwise than by an account payee cheque drawn on a bank or by an account payee bank draft, shall not be allowed as a deduction.
i think words "allowed as a deduction" clears it that it is about revenue exp. as capital exp. are not allowed as deduction in P&L A/c.
depreciation is charged on full block and not on individual asset.
so i think depreciation shall not be disallowed
CA Gaurav Makwana
(Partner)
(126 Points)
Replied 17 November 2009
I agree as it is not dr to P&L there is no question of disallowing the same but Singhania has written on page 390 para 148.3 that " if any assessee purchases a depreciable assest (say car for Rs. 3 lakh by making pyt in cash, depre (i.e. 15 % of Rs. 3 lakh ), which is otherwise deductible, will be disllowed under the provision of section 40A(3) and if it is disallowed whether in subsequent year it is allowable?
FATEMA
(CHARTERED ACCOUNTANT)
(719 Points)
Replied 17 November 2009
I agree with Gaurav.Sec 40A(3) is applicable even if the assesse purchases a depreciable asset.
The depreciation is disallowed only if it exceeds Rs. 20,000 in the year of purchase.It can be allowed in the subsequent years if it does not exceed Rs.20,000.
CA Dhiraj Ramchandani
(CA, M. com)
(10823 Points)
Replied 17 November 2009
@ Prateek Garg : Thank U, But its "DHIRAJ" and not "DHRUV"..., nywz, its fine..
@ Gaurav :
First of all, i really don't find any logic behind disallowing depreciation u/s 40 (a) (3)...
Further, if u say that its written in SINGHANIA (which i've nt reffered yet).., then there must be given some explaination for the same.. And, then such disallowance should continue for the subsequent years too.. As, we disallow whole of such expenditure in normal coarse, in the same way, whole cost of car (Rs. 3 Lacs) should be disallowed by disallowing every depreciation...
Having said that, i still doubt on such treatment, as i really don't think that DEPRECIATION shd b disallowed.., Nywz, have u posted this at EXPERTS... ask them and plz let us know too...
FATEMA
(CHARTERED ACCOUNTANT)
(719 Points)
Replied 17 November 2009
Dhiraj,
Please read the scope of section 40A(3).It says that the section is applicable to purchase of depreciable asset.We debit depreciation to p&l which is related to the asset and hence it is disallowed.
CA Dhiraj Ramchandani
(CA, M. com)
(10823 Points)
Replied 17 November 2009
But Fatema, we are not paying for the depreciation... Its a non-cash expenditure, how can u disallow it u/s 40 a 3 (which itself disallows only cash expenditure)...
And as i said, i need some expert to comment on it,.. SINGHANIA refers that it shd b disallowed for one year, what abt subsequent year..??
So, rather than discussing with each other and giving our own opinions, let some real genuine person come and solve this...
( I don't disagree with ur replies, its just that they r not conveyncing me)..
CA Prateek Garg
(CA in Practice)
(1447 Points)
Replied 17 November 2009
hi Mr. Dhiraj i m sorry, but it also prateek and not pradeep & i m a PCC student.
and to Mr gaurav i want to say that i know that mr. singhania disallowed it
but i still doubt that it should be disallowed
income tax act is the real authority.
and statement of act suggest me that only revenue exp. shall be disallowed
CA Dhiraj Ramchandani
(CA, M. com)
(10823 Points)
Replied 17 November 2009
Sorry, i was in bit hurry...
CA Mohit Agrawal
(Chartered Accountant)
(371 Points)
Replied 17 November 2009
ramchandani is correct depreciation cannot be disallowed
FATEMA
(CHARTERED ACCOUNTANT)
(719 Points)
Replied 17 November 2009
Mohit,
Can u justify ur answer.Why can depreciation not be disallowed u/s 40A(3)?
Gautam
(student)
(92 Points)
Replied 17 November 2009
U/s 40 A (3) Dis allowance is on Payment. I.e. on actual payment this does not apply to Depreciation so it is not disallowed.
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