Urgent tax query

Tax queries 483 views 3 replies

manik

ca in practice

420 Points Joined May 2007

whether cash payment made for purchase of fixed assets allowable or not.as i have read two different views of two renouned authors on this
as per girish ahuja sir's book - cash paid exceeding rs.20000 for purchase of capital assets is not disallowed under sec 40a(3)

as per singhania sir's book , it is written that cash paid for purchase of depriciable assets is disallowed u/s 40a(3)to the extent depriciation is claimed on such portion

please clarify the situation with decided case laws
whether exp on following exceeding rs.20000 be allowed or not
1.land rs.500000
2.car down payment rs.125000
3.machinery purchased rs.550000

Replies (3)

SOUMYADIP

64 Points Joined February 2008

Sec 40 A(3) do not apply to repayment of loans or payment towards the purchase price of capital assets [circular no-34 ,dated -5th march,1970]

In respect of Depreciation, it cannot be disallowed as Sec 40 A(3) is not applicable.

ashish gupta

student

1922 Points Joined May 2008

Giridhar S Karandikar

Team Lead

7558 Points Joined November 2011

Hi,

Please note that any expenditure incurred in excess of RS20k & that is required to be routed through P&L account are only disallowed u/s 40(A)3.

As regards purchase of assets no disallowance is required to be done as these are B/S items & are not routed through the P&L account. As regards depreciation it is only an loss and not an expenditure. Hence where there is a loss no disallowance u/s 40(A)3 is require to be made.

Hence the expenditure incurred on 1,2&3 will not be disallwowed.

Hope the above would help you in undertanding the disallowance.