40A(3)

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Mohan (Querist)
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01 September 2010 Hi all,

If depreciable asset is bought for cash more than 20000 then what is the role of section 40A(3)? Is depreciation disallowed? Any case-laws in this regard, favouring or otherwise?

Thanks in advance

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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01 September 2010 Pl see the views of experts in the following link.
https://www.caclubindia.com/forum/section-40a-3--3932.asp

Mohan

Mohan (Querist)
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01 September 2010 There is sheer confusion among experts. The posted opionions/discussion has not come to any conclusion. Although the section 40A(3) relates to the expenditures yet it should be taken in muc broader preview than that. The section keeps mum on purchase of capital asset and still talks of deductions that would be claimed in Profit & Loss Account. Does the deprecioation not included in the deductions? Isn't there any authority in the forum who can throw some light on this issue with clear guidelines.

Thanks

CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)
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01 September 2010 Sec.40A(3)applicable for purchase of depreciable asset by cash more than Rs.20000/-, Becasue Section 40A(3) applicable for expenses claimed under sections from 30 to 37, depreciation covered under sec.32. hence the Related Depreciation will be disallowed

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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02 September 2010 40A(3) talks about disallowance of expenditure. Wheareas depreciation is an allowance. Expenses cannot be equated with an allowance. In view of that, as per my understanding, depreciation on asset purchased in cash and in excess of Rs. 20,000/- cannot be disallowed.

Mohan

Mohan (Querist)
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02 September 2010 Expense or allowance, how does it matter? After all both are reduced from income to calculate the net profit. So, in that sense nature of depreciation is non-cash expenditure incurred during the year.

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