Cash Payment Exceeds 20000

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Lakshman Paladugu (Querist)
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08 May 2011 Hai friends.... Generally we know that, if cash payment exceeds 20,000 rupees to same party against one bill, the expenditure will be disallowed. Likewise in the case of purchase of fixed asset, what will be the circumstances?

For example, if we purchase computer worth 40,000/- and paid in single payment in cash, is deprecation will be disallowed?

CMA. CS. Sanjay Gupta

CMA. CS. Sanjay Gupta (Expert)
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08 May 2011 Section 40A(3) explains about the disallowance of expenses in the p&l account as expenses are allowed in p&l account. but so far as purchase of fixed assets is concerned it is not charged to p&l account, rather we take it to the B/S by capitalising it and charge depreciation on it on a systematic basis by debiting it to the p&l account as per the rules of the Income tax Act.

So fixed asset is capitalised whether it is purchased throughcash or cheque or exchange or acquisition etc...

Further The expenses u are claiming is of depreciation and not of the asset. So depreciation expenses was not paid in cash to be disallowed u/s 40A(3).

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