sec 40A (3)

I`ll confirm it tomorrow

Circular No. 34, dated 5-3-1970

No disallowance.

capital exp are not debited to P&L a/c hence question of disallowances on purchase value doent arise at all.

depreciation is a non cash expenditure and doesnt involve and cash outflow also. 

from the above two explanation it may be clear to you that theres no disallowances in the above case

Good Explanations

absolutely no disallowance SIMPLE 2 POINTS

1.capital exp not debited to P&L a/c (no purchase effect to P&L)

2.)depreciation is a non cash expenditure.

Sec. 40A(3) does not attract your transaction.

Sec 40A3 applies to only those payments that are debited to profit and loss account.

Dear All,

Sec 40A(3) is applicable for an expenditure which can be claimed as a deduction under Sec 30 to Sec 37. If payment in excess of Rs 20000 is made in cash then deduction under sec 30 to sec 37 is not available. It is disallowed. Sec 40A(3) applies to depreciation also(sec 32). Eg- If any assessee purchases a depreciable asset (say a CAR) for Rs 3 lacs by making payment in cash, depreciation which is otherwise deductible, will be disallowed. under provisions of  Sec 40A3. In case of any doubts please read page 399 para 4 in  TAXMANN`s DIRECT TAXES law & practice for CA Final by Dr. Vinod K Singhania. After reading it I came to know about it.

Dear All,

Sec 40A(3) is applicable for an expenditure which can be claimed as a deduction under Sec 30 to Sec 37. If payment in excess of Rs 20000 is made in cash then deduction under sec 30 to sec 37 is not available. It is disallowed. Sec 40A(3) applies to depreciation also(sec 32). Eg- If any assessee purchases a depreciable asset (say a CAR) for Rs 3 lacs by making payment in cash, depreciation which is otherwise deductible, will be disallowed. under provisions of  Sec 40A3. In case of any doubts please read page 399 para 4 in  TAXMANN`s DIRECT TAXES law & practice for CA Final by Dr. Vinod K Singhania. After reading it I came to know about it.

Dear Naga

I have A.Y. 2008-09 book. Can u pls tell me in which section or chapter  this point is mentioned.....

Depri will be allowed

Dear Naga,

Pls see the circular attached on previous page.

Also pls see that depreciation is an allowance as per sec 32, and not an expenditure.

Further, depreciation is provided on a block of assets, and not on individual assets.

It is practically not possible to trace the depreciation for individual assets, in subsequent years, because of the block concepts.

If the depreciation were to be disallowed, then that would have complications in situations where capital gains should arise on transfer of depreciable assets (50, 50A)....

Also,

pls see the attached file,

Capital expenditure is not covered by 40A(3), 

expenditure means cash outgo as far as 40A(3) is concerned.

But the case is for purchase of goods not purchase of assets.

Dear Swati,

I have AY 2009-10 book, Refer topics on Sec 40A(3).

Hi naga,

I have also seen that in the reckoner, I have also asked the same doubt here...

I think the circular is more reliable than the reckoner...

I am not saying that this is the case law to answer the question originally posed,

Still it gives the principles underlying the situation when read with the circular, i.e,

1. capital expenditure is not covered by 40A(3) - para 16

2. expenditure in the context of 40A(3) means cash outlfow (depreciation is not a cash outflow)

Depreciation is an allowance, not an expense.

It is on the block, not on individual asset....

So the premise of the reckoner fails in my opinion....