cash payment exceeding 20000 in case of fixed asset purchase

Dear Yogi,

Section 40A(3) is applicable even if an assessee purchase a depreciable assets, depreciation will be disallowed by virtue of section 40A(3), (please refer point 5 of  para 49.3 of ready reckoner).

No it is not applicable on Purchase of fixed assets or any other depreciatable assets.

section 40A(3) : expenditure ( other than capital assets) incurred in excess of2000 not by an A/c payee cheque or bank draft in respect of which a payment/ aggregate of payment made to a person in a day shall not be allowed to be reduced as expense while calculating PGBP income

Originally posted by : Yogi Saraf
	I would like to know if payment for purchase of a depreciable asset exceeding 20000 is made in cash, would provisions of Sec 40A(3) be invoked on the depreciation claimed on the asset... pls throw light on the matter...if possible with citations

No it is not applicable to purchase of Capital asset

@ Amit & Akshay,

i have some citations namely ''Janta Metal Supply Co. v/s CIT (1991) 100 CTR (All.) 52'' wherein it is stated no deduction u/s 30 to 37 would be available when payment exceeding Rs.20000 is made in cash, and as depreciation (sec 32) comes under this ambit, disallowance is warranted.

Hi Yogi,

Section 40A(3) is applicable even if an assessee purchases a depreciable assest. For instance, If X purchases a car for business purpose and payment (say, Rs. 4.5 lacs ) made in cash, depreciation will be disallowed by virtue of section 40A(3).

no it   is not applicable bcause , here the assess is not claiming any deduction on the payment made , there is indirect claim by way of depriciation and that cant be disallowed on that ground

this provision shall not apply in respect of expenditure for which no deduction is claimed namely capital expenditure .

Originally posted by : Pursuing CA
	Dear Yogi, Section 40A(3) is applicable even if an assessee purchase a depreciable assets, depreciation will be disallowed by virtue of section 40A(3), (please refer point 5 of  para 49.3 of ready reckoner).

 WRONG  PLZ  CONFIRM BEFORE TELLING ...HOWEVER IF THE CAPITAL EXPENDITURE IS PURCHASE FOR THE SCIENTFIC RESERCH THEN  SEC  . 40 A (3) COMES IN PLAY AS THE ASSESS IS SUPPOSE TO CLAIM IT AS A DEDUCTION DIRECTLY

Good question...as per my understanding section 40 a 3 talks about expenditure.....it has to be revenue in nature since capital expenditure is not debited to p/l account.purchase of assest is capital in nature so its not hitting there.only exceptions BEING Rule 6DD.Deprecition is independent of the said provision,wherein the relavant section 31 which talks about Depreciton do not talk about any disallowance.

correct me 

it is not applicable to purchase of Capital asset

Originally posted by : RADHEKRISHNA0001
	it is not applicable to purchase of Capital asset

Vinod Gupta also endorse the same view 

Sec 40A(3) clearly says when an assessee incurs an expenditure

in your case assessee is not incuring an expenditure because depriciation is non cash expenses.

Therefore 40A(3) is not  applicable to you

Dear Yogi,

Please refer para 49.3 point 5 of Direct Tax ready reckoner of  Dr. V.K Singhania. the depriciation will be disallowed.

Sec 40 A 3 strictly says payments in excess of Rs 20000 towards revenue exp...so its not applicable for purchase of Fixed assets

Just add on - as per Act once the assets enters the block its looses its identity and hence its impossible to exclude the depreciation peratining to specific assets.