"my view is depreciation on assets purchased in cash does not come under the purview of section 40A(3) of the Income tax Act,1961.

an answer by -- B.CHACKRAPANI WARRIER"

Dear Friends 

Kind attention Sri. B.CHACKRAPANI WARRIER

May I request you all to refer

Para 49.3-2 "Scope of section 40A(3)".

Point No.5. "Section 40A(3) is applicable even if an assessee purchases a depreciable asset. For instance, if X purchases a car for business purposes and payment ( say, Rs.4.5 lakh) is made in cash, "DEPRECIATION" will be disallowed by virtue of section 40A(3)".   from TAXMANN'S 'DIRECT TAXES READY RECKONER' written by DR.VINOD K.SINGANIA. 

 Courtesy  to the Author.

Hope, with this  bit more subtle clarity-cum-confusion, we may find a point.

Section 40A(3) does not apply to capital expenditure............. deprn allowd @ 60%

Yes, Depreciation will be available. Section 40A3 does not apply in this case

Depreciation shall be allowable u/s 32 of the IT act, 61 @ 60% of the actual cost as the computer is put to use for > 180 days during the previous year otherwise it shall be 30%.

Section 40 A (3) says “If an assessee incurs any expenditure in respect of which payment in excess of Rs.20,000 is made otherwise than by an account payee cheque or an account payee bank draft, 100 percent of such expenditure will not be allowable as deduction.

     but you can take depreciation @ 60% on 3000000

Sec 40 A (3) will apply to Depreciable Assets. So the said purchase of computer is disallowed if the cash is paid in a single payment exceeds Rs.20,000/- .

As per Singhania , the learned and respectable author, the depriciation will be disallowable...

i think sec 40A(3) is for disallowance or otherwise of exp in PEL A/c but  car being capital asset doesnt qualify for same and consequently dep. being an allowance rather than expenditure is outside purview of it

and even in practical world such discrepencies are not readily brought forward

Dear Gaurav,

                             There is no question of Dep. in this matter because As per IT Act act sec. 40(A)3 intial the capital Expenditure is not come  in the dep. schedule because the same is disallowed so no need to think about depreciation.

PLS GIVE CLARIFICATION ON BELLOW;

1.WHY DEPRECIATION ON ASSETS TO BE DEDUCTED FROM ASSET VALUE? ( SAY Rs.60 ON Rs.100)

2.THE DEPRECIATION VALUE (Rs.20) IS SHOWN AS EXPENSE IN P&L ACCOUNT. i.e,. NET PROFIT OF COMPANY WILL BE UNDER VALUED. WHY IT WILL BE HAPPEND.?

3.FOR WHAT PURPOSE DEPRECIATION AMOUNT(Rs.20) WILL BE USED?