Cash payment

Section 40A(3) is applicable even if an assessee purchases a depreciable asset....

Yes, there is no problem in such transaction since the payment in cash for purchase of capital asset(i.e.capital expenditure) are not covered by section 40A(3) .

The following link can also be referred for the same.

/experts/morethan-rs-20-000-cash-payments-capital-expenditure-600280.asp#.UL7dr-Tqn6Y

I agree With Sumit Grover.... It is a CAPEX....So it is aloowed....

Dear Sumit, 

I beg to differ with you in this regard as

although it is capital expenditure but the depreciation on this capital asset stands disallowed. 

Sowmya S,

It is advisable that you should purchase the asset through an account payee cheque.

I agree With Sumit Grover..

As per my knowledge, you will not be eligible to claim depreciation on the Second Hand Vehicle, if you are purchasing the same by paying Cash.

Regards,

Devendra Kulkarni

Section 40A(3) is not applicable if the payment is not debited to revenue,ie, where no deduction is claimed for business income computation.

Depreciation is not a cash expenditure.

One should also examine the scope of application of unexplained expenditure under section 69C if the payment is made in cash.

if a depreciable asset is purchased in cash then it is allwd to be capitalised n its depreciation claim is disallowed...!!!

Its always safe for companies to make payments only through "A/C PAYEE CHEQUE", if it exceeds Rs.20000/- whether its a revenue expenditure or capital expenditure.