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Disallowance under section 40(a)(3)


(Querist)
12 October 2017
Sir,
If we have purchased a capital asset for cash more than Rs.20000/-, is disallowance under section 40(A)(3) will attract or not? Please explain in detail.


Ashiwini Ballodia (Expert)


Click to Talk 12 October 2017
1st thing I want to tell you that Finance Act 17 has revised the cash payment limit u/s 40A(3) to Rs.10000 from Rs.20000
In your case as you had made payment exceeding the limit us 40A(3) so disallowance is attracted and as you had purchased a capital asset the deprecation on the capital asset will be disallowed

kiran (Querist)
12 October 2017
Thank you sir,
Kindly clarify the below doubt also
To which extent that depreciation will be disallowed? (100% or 30%)

Ashiwini Ballodia (Expert)


Click to Talk 12 October 2017
Deprecation will be not allowed i.e 100% disallowed

kiran (Querist)
13 October 2017
Sir, I'm in a dilemma I have read an article which is in contradiction to your answer. Could you please go through the following link of that article :
https://taxguru.in/income-tax/disallowance-depreciation-capital-expenditure-cash-payment.html/
Please help me out of this
Regards,
Kiran

Ashiwini Ballodia (Expert)


Click to Talk 13 October 2017
Thanks Kiran Ji for Correcting me.
As per the article from Finance Act 2017 capital asset cannot capitalised if the payment exceeds 40A(3)
Example - Asset Cost 100000. Amount paid by Cheque 80000 and amount paid by cash (in single day) 20000
Now as per Finance Act 2017 you can only capitalised the amount of Rs.80000 (Rs.20000 not to be capitalised)


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