16 April 2010
As per exceptions given in rule governing section 40A(3) payment can be made in cash exceeding Rs. 20000 for the purchase of fixed assets. My query is keeping above rule in mind whether payment in cash exceeding 20000 can be made during setting up of project (Construction period) as all the expenses incurred during the setting up of project are to be capitalized rather than being claimed as expense in profit & loss a/c
16 April 2010
The word 'expenditure' refers to any payment made by the assessee and taken into account in computing the total income. Citation:- Sajowanlal Jaiswal Vs CIT (1976) 103 ITR 706(Ori). So if an expenditure is not taken into P & L account question of disallowance under section 40A(3) does not arise.
17 April 2010
Thax For Reply Sir But ultimately either in the shape of depreciation or in the shape of writting off of pre-operating expenses, these cash expenses shall be claimed as deduction in the coming years when project will come into operation and start generating revenue.
The first thing is that Depreciation is not an expense but it is an allowance.so,when expenditure is capitalised and we claim depreciation on it then it is the valid one.\
Second thing is that pre-operative expenses are to be written off over a given period of time.
I hope this will clarify your doubt.
Guest
Guest
(Querist)
19 April 2010
Guest
Guest
(Querist)
19 April 2010
Thax For Reply Can you please elaborate the second point given by you Is same is the case with section 43B. If expenses specified u/s 43B are not paid till the date of filling return will company be able to capitalise these expenses during the construction period (during construction of project)
As per section 43b expenses are allowed to be deducted only on the actual payment.
However,here we have not started our project. At the same time all expenditures incurred are pre-operative expenses which are not covered under the said section.
So, in my opinion,the question of section 43b does not arise.
Regards,
C.A.NISHIT DOSHI
Guest
Guest
(Querist)
22 April 2010
Hi Nishit G, Pre operative expenses do cover expenses coming under section 43B such as wages which are being paid to workers engaged into construction.
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