[Expenses or payments not deductible in certain circumstances.
Sec 40A(3):(3) Where the assessee incurs any expenditure in respect of 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, exceeds twenty thousand rupees otherwise than by an account payee cheque
drawn on a bank or account payee bank draft, no deduction shall be allowed in respect
of such expenditure;
now here the word expenditure-can be interpreted as revenur or capital..But if we look at the heading of this sec it means it applies for exps only.For eg payment for fixed assets-fixed assets are of the type- capital in nature therefore theses are capital expenditure & not revenue expenditure/expnse..
Conclusion wht i think this sec applies to exps only.........whether am i right
Q2: whether dep on such asset will be allowed or not??
some authors like vinod gupta-dep on such FA [for which pymt is made in excess of 20000/-] will be allowed because in sec 40A(3) we r concerned about a particular expenditure & its payment & not with all related expenditure.therefore dep should be allowed .
But in singhania-ready reckoner[34 edition-para 49.3-2[pt 5] he stated tht dep should be disallowed .........on the other hand in his book on direct taxes CA Final-he specified the conditions of sec 40A(3) as Incurrs any exp which is otherwise deductible while computing Pgbp & 2 condition is that pymt is made i.r.of such ependiture
Therefore if we analyse above conditions----
For fixed assets -position is clear
dep on such fixed asset----(2) cond is not fulfilled that is u r not making any pymt for such depreciation
pls clarify if u have any case law on this situation..........dep on FA not covered u/s 40A(30)
CAclubindia
