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Depreciation on fixed asset

25 May 2018

If cost of fixed asset is rs.15000 and its payment is done in cash in two different dates of rs.9000 and 6000.. in this case, cash limit of rs 10000 is followed but total cost of fixed asset is paid in cash then in that case whether depreciation allowed or not...
please provide the link with answer...

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8 Replies

SWARNAMALYA B (285 Points)
Replied 25 May 2018

Since it is paid on two different dates deprecation can be allowed.

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A B Kundu (Professional) (1422 Points)
Replied 25 May 2018

I think depreciation shall be allowed as the provision of Sec.43 gives more focus on "payment made in cash in a single day to a person more than Rs.10,000", It's not saying that "payment made for purchasing an asset".

Read the links provided below-

https://klaggarwal.com/direct-tax/restrictions-cash-transactions/

https://timesofindia.indiatimes.com/city/nagpur/no-depreciation-on-assets-got-in-cash/articleshow/57048791.cms

1 Like

rama krishnan (12234 Points)
Replied 25 May 2018

depreciation will be allowed

RAJA P M ("Do the Right Thing...!!!") (127921 Points)
Replied 26 May 2018

I agreed to Mr A B Kundu...

1 Like

Gagan Aggarwal (226 Points)
Replied 26 May 2018

but there is another section which restricts that... i.e. purchase of fixed assets in cash above rs. 10000

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A B Kundu (Professional) (1422 Points)
Replied 26 May 2018

Originally posted by : Gagan Aggarwal
	but there is another section which restricts that... i.e. purchase of fixed assets in cash above rs. 10000

Can you please quote the section number?

Gagan Aggarwal (226 Points)
Replied 26 May 2018

Disallowance of depreciation under section 32 and capital expenditure under section 35AD on cash payment

Under the existing provisions of the Act, revenue expenditure incurred in cash exceeding certain monetary threshold is not allowable as per sub-section (3) of section 40A of the Act except in specified circumstances as referred to in Rule 6DD of the Income-tax Rules, 1962. However, there is no provision to disallow the capital expenditure incurred in cash. Further, section 35AD of the Act , inter-alia provides for investment linked deduction on the amount capital expenditure incurred, wholly or exclusively for the purposes of business, during the previous year for a specified business except capital expenditure incurred for acquisition of any land or goodwill or financial instrument.

In order to discourage cash transactions even for capital expenditure, it is proposed to amend the provisions of section 43 of the Act to provide that where an assessee incurs any expenditure for acquisition of any asset in respect which a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft or use of electronic clearing system through a bank account, exceeds ten thousand rupees, such expenditure shall be ignored for the purposes of determination of actual cost of such asset.

It is further proposed to amend section 35AD of the Act to provide that any expenditure in respect of which payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or an account payee bank draft or use of electronic clearing system through a bank account, exceeds ten thousand rupees, no deduction shall be allowed in respect of such expenditure.

A B Kundu (Professional) (1422 Points)
Replied 26 May 2018

Sir, I have referred the same provision. Same amendment has been done in Sec.32 (through Sec.43) and in Sec.35AD (amend the section itself), languages are same in both the sections. Then where is the confusion??