income tax Act

This query is : Resolved

venkithari (Querist)
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30 August 2007 Does Sec 40A(3) apply to acquisition of fixed assets on which depreciation is claimed.

Cost of the asset is not climed as expenses but only the depreciation is claimed.In such a case what should be reported in tax audit report.

In Taxman's ready reckoner 2008-09,in Page A-109 in para 49.3.3 it is mentioned that Sec.40A(3) is applicable if an assessee purchases a depreciable asset.

Kindly clarify.

Late CA Sampat Jain

Late CA Sampat Jain (Expert)
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31 August 2007 The old provison stated as follows:

"twenty per cent of such expenditure shall not be allowed as a deduction"
.
" The amended provision states as follows;

"no deduction shall be allowed in respect of such expenditure;"

The amendment is applicable from asst year 2008-2009.

In view of the amended language, depreciation claimed in respect of expenditure on capital asset purchased in cash exceeding the limit will also be disallowed.
Tax audit report should report accordingly for asst year 2008-2009.

For earlier years however , capital expenditure is not covered u/s 40(A)(3)

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