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Cash payment exceeding rs. 20000 in case of fixed assets

Tax queries 4577 views 5 replies

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

Replies (5)

Kindly refer the following link as the question which you have asked is 100% same (even language is same) as of the question asked in that link. It'll save the time for you and for others also.

 

/forum/cash-payment-exceeding-20000-in-case-of-fixed-asset-purchase-131963.asp#.ULmI6GfTonY

 

- Ruben balooni


 

No disallowance under sub-section (3) of section 40A shall be made where any payment in a sum exceeding[twenty thousand] rupees is made otherwise than by a crossed cheque drawn on a bank or by a crossed bank draft in the case of purchase of a Capital Asset.....

Thanks Sanket

But in the Ready Reckoner it is mentioned that Section 40A(3) is applicable even if an assessee purchases a depreciable assets.

I am little confused.

Yes In the ready recknor, it is mentioned that depreciation will be disallowed if an assessee makes payment in cash in excess of Rs. 20000 for purchase of fixed asset. If it is not so, members please give reference to relevant provision or case. Thanks

The assessee incurs any expenditure which is otherwise deductible under the other provisions of the Income Tax Act for computing business/profession income (eg, expenditure for purchase of raw material,trading goods etc) and the amt of bill and payment exceeds Rs20000. In your case there is capital expenditure involved in purchase of depreciable asset which is also not deductible under the head profits and gains of bus/prof.we only get deduction as depreciation.


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