query in respect of section 40A(3)

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CA Umashankar Vaishnav (Querist)
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21 February 2009 RESPECTED SIR,
MAY I HAVE ONE QUERY IN RESPECT OF INCOME TAX “ PROFIT & GAIN OF BUSINESS AND PROFESSION “ . IN IT UNDER SECTION 40(A) (3) ANY EXPENSES ( PAYMENT) BY MEANS OF CASH PAYMENT( EXCEPT BY AN ACCOUNT PAYYEE CHEQUE OR AN ACCOUNT PAYEE BANK DRAFT) EXCEED RS. 20000 /-
THEN SUCH EXPENSES MAY BE 100% DISALLOWED AND NOT DEDUCTIBLE.
[ AMENDMENT IN FINANCE BILL 2008]

[ UPTO THE FINANCE BILL 2006 IT MAY BE ONLY 20% DIS-ALLOWED]

NOW , IF ANY PERSON DURING THE PREVIOUS YEAR 2008-09 PUCHASES A COMPUTER EQUIPMENTS FOR CASH PAYMENT OF RS .500000 /- , THEN FOR SUCH CAPITAL ASSET IF DEPRECIATION CLAIMED BY AN ASSESSE UNDER SECTION 32 @ 60% (THAT IS RS.300000/-). IS SUCH DEPRECIATION BEING ALLOWED OR NOT ALLOWED AS DEDUCTIBLE EXPENDITURE IN PROFIT & LOSS A/C STATEMENT OF AN ASSESSE.
GIVEN IN BOOK OF INCOME TAX THAT SECTION 40A(3) IS APPLICABLE EVEN IF AN ASSESSEE PUCHASESA DEPRECIABLE ASSET. ALSO, SECTION 40A(3) APPLY IN RESPECT OF AN EXPENDITURE WHICH IS CLAIMED AS DEDUCTION UNDER SECTIONS 30 TO 37 . AS DEPRECIATION CAME UNDER SECTION 32.

SO SIR WHAT WILL LIKELY TO BE DONE UNDER THAT PARTICULAR SITUATION AS PER THE INCOME TAX ACT .

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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21 February 2009 Depreciation is an allowance(section 32(2)of IT Act,1961) and not an expenditure. Therefore section 40A(3) will not attract to depreciation.

Section 40A(3) is for revenue expenditure only. Therefore no harm in purchasing fixed assets in cash.

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