purchase of fixed assets in cash

Save Share

This query is : Resolved

seema singla (Querist)

01 April 2009 A pvt. ltd co. purchased a car in cash for Rs. 9.00. Is It OK with the co.?
Can A co. (Pvt or Public) purchase fixed assets in cash? If yes, then what may be the consequences and whether the payment can be shown completely in one transaction or it should be Rs. 20000 in one transaction only.

CA Devanshi Gandhi (Ajani)

CA Devanshi Gandhi (Ajani) (Expert)

01 April 2009 as per sec 40a(3)if payment is made exceeding Rs. 20000 otherwise than by acc payee cheque or draft expense will be fully disallowed...
but as it is car it needs to be capitalized and so there is no question of diallowance

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)

01 April 2009 The said transaction, according to me, is O.K. The question of Rs. 20000/- etc., will come under section 40A(3) r.w.r 6DD. Those provisions does not apply in respect of an expenditure which is not to be claimed as deduction u/ss 30 to 37. On the same logic, payment for purchase of assets, like machinery, car etc., will not attract the above said section and rule. The decision in CIT Vs. Alpha Toya ltd (2008) 22(I) ITCL 40 (P&H-HC),though delivered in a different context for the asst.year 1989-90, will also help to substantiate the above view.

CA.MANOJ LAMBA

CA.MANOJ LAMBA (Expert)

01 April 2009 PURCHASE OF CAR IS NOT AN EXPENDITURE UNDER SECTION 37 IT IS TO BE CAPITALISED AS FIXED ASSETS. WHEN IT IS NOT TO BOOKED AS EXPENDITURE, HENCE QUESTION OF DISALLOWANCE DOES NOT ARISE.

HUZAIFA HUSSAIN

HUZAIFA HUSSAIN (Expert)

01 April 2009 I agree with experts

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now