Sec 40A(3) Disallowance

Save Share

This query is : Resolved

Vikram (Querist)
Follow

03 March 2009 Pls advise on disallowance & other implications (if any under IT Act), where Capital Expenditure incurred for Constuction of factory premises on building materials for which a single cash payment exceeding Rs 1.0 lakh was made?

CA LOKESH KASAT, FCA, M.Com

CA LOKESH KASAT, FCA, M.Com (Expert)
Follow

03 March 2009 Dear Vikram,
Section 40A(3) will apply on cash payment exceeding 20,000 in a day for revenue expenditure only.
The question of Capital Expenditure doesnt exist here, as Capital Expenditure is not allowable and you have to charge Dep on the same as per the Closing WDV of BLOCK.

CA Devanshi Gandhi (Ajani)

CA Devanshi Gandhi (Ajani) (Expert)
Follow

03 March 2009 i agree with MR. Lokesh

Late CA Sampat Jain

Late CA Sampat Jain (Expert)
Follow

03 March 2009 Section 40(A) earlier read as follows:

(3) Where the assessee incurs any expenditure51 in respect of which payment is made, after such date (not being later than the 31st day of March, 1969) as may be specified in this behalf by the Central Government by notification in the Official Gazette, in a sum exceeding [twenty] thousand] rupees otherwise than by [an account payee cheque drawn on a bank or account payee bank draft], [twenty per cent of such expenditure shall not be allowed as a deduction] :

The following sub-section (3) shall be substituted for the existing sub-section (3) of section 40A by the Finance Act, 2007, w.e.f. 1-4-2008 :

(3)(a) Where the assessee incurs any expenditure in respect of which payment is made in a sum exceeding twenty thousand rupees otherwise than by an account payee cheque drawn on a bank or account payee bank draft, no deduction shall be allowed in respect of such expenditure

SO EARLIER:
[twenty per cent of such expenditure shall not be allowed as a deduction]

AND NOW:
no deduction shall be allowed in respect of such expenditure

SO the position is this earlier expenditure was disallowed ......since capital expenditure was never allowed as expenditure , the question of disallowance did not arise.

BUT , now no deduction is to be allowed inrespect of such expendiuture. Depreciation is an deduction allowed in repect of capital expenditure made . Therefore , now if capital expenditure is incurred in excess of RS 20000/- i n cash , deduction in respect of such expenditure , i.e. depreciaiton may be disallowed

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