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Depreciation and Sec 43B

Amir (Learner) (4016 Points)

17 April 2010

HI Members,

Pls share ur views on this -

Whether Sec 43B can be extended to dissallow depreciation on the duties & taxes(like entry tax, etc) included in the cost of fixed assets and not paid till the due date of filing return of Income??

Thanks & Regds

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17 Replies

yogeshwar malhotra (partner) (112 Points)
Replied 17 April 2010

no . as per section 43b only those exp are to be disallowed which are dbeited to pl a/c

Amir (Learner) (4016 Points)
Replied 17 April 2010

Originally posted by : yogeshwar malhotra
	no . as per section 43b only those exp are to be disallowed which are dbeited to pl a/c

Dear Sir,

Thanks for ur reply but with due respect I would say Depreciation is also debited to P& LA/c only .......

Ratan Deep Saxena (Asstt Manager (Accounts & Finance)) (2998 Points)
Replied 17 April 2010

Dear Amir Bhai,

Under Sec 43B of Indian Income Tax Act, 1965
express "Certain deductions to be only on actual payment"

(a) any sum payable by the assessee by way of tax11a, duty,
cess or fee, by whatever name called, under any law for the
time being in force, or

(b) any sum payable by the assessee as an employer by way
of contribution to any provident fund or superannuation
fund or gratuity fund or any other fund for the welfare of
employees, or

(c) any sum referred to in clause (ii) of sub-section (1)
of section 36,or

(d) any sum payable by the assessee as interest on any loan
or borrowing from any public financial institution or a
State financial corporation or a State industrial
investment corporation, in accordance with the terms and
conditions of the agreement governing such loan or borrowing

(e) any sum payable by the assessee as interest on any
[loan or advances] from a scheduled bank in accordance with
the terms and conditions of the agreement governing such
loan or advances or

(f) any sum payable by the assessee as an employer in lieu
of any leave at the credit of his employee,

shall be allowed (irrespective of the previous year in
which the liability to pay such sum was incurred by the
assessee according to the method of accounting regularly
employed by him) only in computing the income referred to
in section 28 of that previous year in which such sum is
actually paid by him

Section 43B does not specify any thing about depreciation .

regards,
ratan

CA Ayush Agarwal (Kolkata-Pune-Mumbai) (27344 Points)
Replied 17 April 2010

Amir Bhai,

UR Doubt is Really Appreciable….

As Per My Knowledge,

There is No Such Case I Seen For Same U Asked by……

And Regarding Section 43 B Concerned, It is Silent For Case of Depreciation.

Nicky (Chartered Accountant) (245 Points)
Replied 17 April 2010

Amir pretty interesting query...

There was a similar discussion wherein it was discussed that if TDS is not deducted on Fixed Assets then depreciation would be disallowed, which is almost in line with your thought process for 43B...

I would simply follow the rule of beneficial interpretation, "What suited thou, unless not against the act, would be followed"

GAURAV JAIN (C.A. F!N@L Group-1 Clear...) (278 Points)
Replied 17 April 2010

its very good question....

if entry tax is included in the cost of fixed asset then question of deduction u/s 43B will not be arise and depreciation will be allowed in p&L a/c...

whether i m right or wrong?????

plzzzz clarify this....

Amir (Learner) (4016 Points)
Replied 17 April 2010

Dear Nicky Sir,

I am not sure but I feel -

"Beneficial rule" is always used to extend the meaning underneath the provision i:e in cases of ALLOWANCE whereas 43B is a section of DISALLOWANCE & here instead of giving extended meaning we are restricting the provision.

So I think not possible...

1 Like

Sumit K. Garg (Article Assistant) (40 Points)
Replied 17 April 2010

Dear Amir,

I m agree with u that Depreciation is also debited to P&L a/c but depreciation to the extent cannot be disallowed because same case is 40A(3). This section disallows only expenditure if exceeds 20000/35000/- in cash but we purchase fixed assets in cash and claims depreciation. On that FA, depreciation is allowed u/s 40A(3).

Law is very clear that entry tax will be disallowed not depreciation.

Regards,

Sumit K. Garg

CA Ghanshyam Joshi (CA, Dip IFR (ACCA UK)) (3229 Points)
Replied 17 April 2010

Dear Amir,

Very interesting query.

Sec 43B says about amounts debited to profit and loss account. Entry Tax on merchandise goods should be debited to P&L and it should be paid by due date of filling of return. In this case the entry tax is for fixed asset and it is capitalized along with Fixed Asset. Hence question of dissallowance does not arise. Neither partial depreciation relating to entry tax be disallowed not the amount of entry tax.

CA.PRAMOD KUMAR PANDA (Chartered Accountants) (204 Points)
Replied 17 April 2010

Section-43B is for disallowance of expenses debited to the Profit & loss Account. Depreciation is not an expenses. It is an allowance and therefore the provision of Section 43B is not attracted. Similar is the case with purchase of Fixed Assets valuing more than Rs.20000/- by cash payment. The payment cannot be disallowed U/S 40A(3), since the expenses is of capital nature and not debited to the Profit & Loss account. Also in the year of acquisition of such assets, the depreciation claimed and debited to the Profit & Loss Account cannot be disallowed, since its an allowance.

(Guest)

dear amir,

under section 43b only those expenditure will be disallowed which require ctual payment of expenditure like bonus,interest.if u take the case of fixed asset payment duty then duty will be disallowed but there is no relation of depreciation with section 43b bcoz it does not require payment.

regards

tarun rustagi

Girish Mathuria (STUDENt) (138 Points)
Replied 18 April 2010

in 43B expense can be disallowed only when actual payemnt is not done on aur before the due date for payemnt

CA Ayush Agarwal (Kolkata-Pune-Mumbai) (27344 Points)
Replied 18 April 2010

Hello Amir Bhai,

I Find The Solution......

That Section 43B Says That Duty Cess If Not Paid B4 Due Date of Filling Return.Then it Disallowed & allowed as per Cash Basis.......

But in UR Case,

AS - 10 Says That At Time of Purchase of Asset Duty Paid is To Be Capitalized....

& as Said we Capitalized.....^& Then Here is No Relation with Section 43B,

Bcoz The Duty Cess Which arer Paid Directly on Traded Goods.are Mentioned in section 43B

Hence, The Duty Paid on Fixed Asset is Not at all Relevant to section 43b,

Depreciation is allowewd as per sec 32, on WDV of Fix asse..

Here we are not taking credit of tax duty whatever paid on asset..

just we are capitalizing it........

hence allowable.

(Guest)

i agree with u dear ayush but make me correct

if the expenditure in respect of construction of building like payment made to contractor against constract work done by him without tds deduction is disallowed in spite of capital expenditure and the same will not form part of the cost of building and when this will not added to the cost then how can we claim depreciation on this