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Depreciation on fixed assets?

Somaas Kandan (CA Final) (385 Points)

11 June 2016

Whether Depreciation will be allowed under IT act if Fixed asset is purchased through cash payment?

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3 Replies

mohammad rasool baig (Management Consultant) (1026 Points)
Replied 13 June 2016

Depriciation is allowed but Section 40 A 3 will be appliacble for the cash payments in case of procurement of fixed assets also. so please check the same.

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subhash kumar jha (PROFESSION) (445 Points)
Replied 13 June 2016

Yes depreciation will be allowed. No question of section 40A(3)

CA MANISH BINDAL (CHARTERED ACCOUNTANT ) (535 Points)
Replied 13 June 2016

No . Depreciation will not be disallowed. Because Rule 6DD does not apply to purchase of Fixed Assets. Hence you can buy fixed assets in cash without any limit and claim depreciation.The payment for purchase of Fixed Assets is not 'any expenditure'of revenue nature. It is not debited in P & l a/c. Depreciation is allowed as per law if assets is owned and used for business or profession.Therefore,Section 40 A(3) sholuld not be applied. However, use of words 'no deduction shall be allowed in respect of such expenditure' will cause litigation because the AO will take viee that 'any expenditure' includes even capital expenditure and depreciation being a deduction i.r.o. such expenditure,Section 40A(3) is applicable.