Section 40a(3)
This query is : Resolved
CA BIREN SHAH
(Querist)
12 June 2012
Sir,
Cash payment of an expenditure exceeding 20000 is disallowed. but what if we purchase fixed assets in cash? in that case whether depreciation will be allowed or not?
Cash payment of an expenditure exceeding 20000 is disallowed. but what if we purchase fixed assets in cash? in that case whether depreciation will be allowed or not?
jegannath G
(Expert)
12 June 2012
it will not have an impact....any expenses incurred in cash for more than Rs 20000/-
Section 40A(3):
Where the assessee incurs any expenditure in respect of which a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, exceeds twenty thousand rupees, no deduction shall be allowed in respect of such expenditure.
Hence no addition / disallowance
Section 40A(3):
Where the assessee incurs any expenditure in respect of which a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft, exceeds twenty thousand rupees, no deduction shall be allowed in respect of such expenditure.
Hence no addition / disallowance
CA BIREN SHAH
(Querist)
12 June 2012
What if amount of depreciation exceed Rs.20000?
CA BIREN SHAH
(Querist)
12 June 2012
What if amount of depreciation exceed Rs.20000?
12 June 2012
The section 40(A)3 is not applicable in case of capital expenditure which are not deductible under the head business or profession.
And also in case of depreciation 40(A)3 won't applicable since there is no cash outlay at all.
And also in case of depreciation 40(A)3 won't applicable since there is no cash outlay at all.
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CA Prashant Gupta
(Expert)
12 June 2012
40A(3) doesn't applicable on capital exp. So if u purchase fixed asset there is no revenue exp. so no effect of disallow or not.
40A(3) is for cash exp. Depreciation is not an cash payment. So there is no disallowance of this.
40A(3) is for cash exp. Depreciation is not an cash payment. So there is no disallowance of this.
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CA CS Amit S. Kedia
(Expert)
12 June 2012
Dear Mr. Biren,
what can be disallowed under Section 40A(3) is only expenditure incurred and not any allowance admissible to an assessee. Therefore, the depreciation allowance cannot be made a subject matter of disallowance under Section 40A(3).
Thanks
what can be disallowed under Section 40A(3) is only expenditure incurred and not any allowance admissible to an assessee. Therefore, the depreciation allowance cannot be made a subject matter of disallowance under Section 40A(3).
Thanks
05 June 2013
Section 40 A(3) is for expenses covered under sections 30 to 37 of the Income tax act,1961 and claimed as deduction. Though depreciation is covered in between those sections, it is not an expense but an allowance. So section 40A(3) cannot be applied on depreciation on cash purchase of assets. Further Circular no. 34 dated 05-03-1970 also says that section 40 A(3) is not applicable for purchase of a capital asset not meant for resale.
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