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Section 40A

surabhi (CA Final) (76 Points)

16 September 2010

Hi,

A company purchases a computer costing Rs. 35000 and makes the payment in cash. The company proposes to provide depreciation on this asset. Will Section 40A be attracted in such case and whether the claim for depreciation is in order?

Please let me know.

Thanks

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13 Replies

CA.G.Muguntha Narayanan (Internal Auditor at TVS Motors) (2195 Points)
Replied 16 September 2010

Dear Surabhi,

the company has purchased a Capital asset. So there is no bar on the company to claim depreciation

Max Payne (employed) (2569 Points)
Replied 16 September 2010

Dear friend,

I am agreeing with CA.G.Muguntha Narayanan

You can refer Circular No 34/1970 issued by CBDT.

40A(3) is not applicable on the purchase price paid for fixed assets.

Please disbelieve the reckoner.

Sunshine (Helping All) (10575 Points)
Replied 16 September 2010

i agree ...

madhur gupta (student/article ) (1022 Points)
Replied 16 September 2010

No 40a

u can make payment in cash for purchasing capital asset.

Manoj BG (Tax Professional and in Service) (1795 Points)
Replied 16 September 2010

section 40A would not attracted since it is applicable only to revenue expenditures and not to capital expenditure.

Regards,

Manoj

savita madhavan (Article) (37 Points)
Replied 16 September 2010

Section 40A(3) is applicable only to revenue expenditure.

Sanjay Singh Rana (CA) (208 Points)
Replied 16 September 2010

section 40A(3) is applicable in respect of an expenditure claimed as deduction under sections 30 to 37 since purchase in ur case is of Depreciable capital asset such expenditure will not be allowed under section 30 to 37 hence section 40A (3) not applicable .

thanks

Parth - CA,CS,CMA (Learner) (406 Points)
Replied 17 September 2010

Originally posted by : Phoenix
	Dear friend, I am agreeing with CA.G.Muguntha Narayanan You can refer Circular No 34/1970 issued by CBDT. 40A(3) is not applicable on the purchase price paid for fixed assets. Please disbelieve the reckoner.

Thanx Phoenix

I was in search of this circular since days..:)

Santosh (Student ( Final Year - New )) (348 Points)
Replied 17 September 2010

Originally posted by : CA.G.Muguntha Narayanan
	Dear Surabhi, the company has purchased a Capital asset. So there is no bar on the company to claim depreciation

I m agreeing with Narayanan Sir.

Saurabh Toshniwal (ca final) (2358 Points)
Replied 17 September 2010

Originally posted by : Sanjay Singh Rana
	section 40A(3) is applicable in respect of an expenditure claimed as deduction under sections 30 to 37 since purchase in ur case is of Depreciable capital asset such expenditure will not be allowed under section 30 to 37 hence section 40A (3) not applicable . thanks

M .K. Jha (CA Final) (484 Points)
Replied 17 September 2010

All the coments are nice this is right that Sec 40A not applicable to capital expenditure and depreciation is allowable even if amount paid in cash over & Rs 20,000/-

Karan (CA) (207 Points)
Replied 17 September 2010

"All the coments are nice this is right that Sec 40A not applicable to capital expenditure and depreciation is allowable even if amount paid in cash over & Rs 20,000/-"

I agree with Mayank.