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Disallowences

Raj Kumar (Article Student) (25 Points)

04 July 2008

Is amount paid towards purchase of an asset above Rs 20000/-, disallowed by the IT dept.?

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11 Replies

G.M.Muthu (Associate) (54 Points)
Replied 04 July 2008

For purchase of asset there is no maximum limit

but,Section 43B states that if any expenses paid by any assessee more than Rs.20,000 to be disallowable

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Rohit Agarwal (AGM (Accounts)) (269 Points)
Replied 04 July 2008

for purchase of asset there is no such provision

F.X.Aseervadam (Sr.Accounts & Admin Execut) (20 Points)
Replied 04 July 2008

we have purchase computers to the tune of Rs.64,000/= by cash, whether it will be disallowed. pls let me know

Late CA Sampat Jain (Chartered Accountant) (4772 Points)
Replied 04 July 2008

After amendment of section 40(A)(3) , if an asset has been purchased in cash exceding Rs 20,000 in cash .............depreciation on such asset may be disallowed.

The old provison stated as follows:

"twenty per cent of such expenditure shall not be allowed as a deduction"
.
" The amended provision states as follows;

"no deduction shall be allowed in respect of such expenditure;"

The amendment is applicable from asst year 2008-2009.

In view of the amended language, depreciation claimed in respect of expenditure on capital asset purchased in cash exceeding the limit will also be disallowed.
Tax audit report should report accordingly for asst year 2008-2009.

For earlier years however , capital expenditure is not covered u/s 40(A)(3

CA Rahul Gupta (Ca ) (57 Points)
Replied 04 July 2008

no the amount is not disallowed as the purchase of asset does not gets routed through the profit and loss account so on purchase of assets one can make payment exceeding rs.20000 in cash.and section 40A(3) is not applicable here.