MSME Certified Income Tax Live Batch to commence from 21st January 2022. Limited Seats. Register Now!!

taskopad

Share on Facebook

Share on Twitter

Share on LinkedIn

Share on Email

Share More

sec 40A (3)

Page no : 2

Naga Praveen (Chartered Accountant) (304 Points)
Replied 06 April 2010

I`ll confirm it tomorrow

Max Payne (employed) (2569 Points)
Replied 06 April 2010

Ronak Dharnidharka (senior article) (43 Points)
Replied 07 April 2010

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

Santhosh Poojary (SIEMPRE AHÍ PARA TI) (15587 Points)
Replied 07 April 2010

Good Explanations

Luneau ( ) (38 Points)
Replied 07 April 2010

@ Naga

 

The book adjustment that you are taking about is the one mentioned in rule 6DD which reads that 'where the payment is made by a book adjustment from any account in a bank to any other account in that or any other bank' which is not disallowed.

 

Therefore depreciation is allowed.

 

Originally posted by : Naga Praveen Thota


Swati,

40A(3) also applies to cases of book adjustments. Once refer to Taxmann material for Direct Taxes. In that it is mentioned that if an asset is purchased by cash for more than Rs 20000, the depreciation on it will be disallowed.

john (LEARNER) (531 Points)
Replied 07 April 2010

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.

Naga Praveen (Chartered Accountant) (304 Points)
Replied 07 April 2010

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.

V.Ganapathy Subramanian (Dy Manager Accounts) (62 Points)
Replied 07 April 2010

Section 40A(3) Specifically deals with expenditure incurred in cash in excess of Rs.20000/-.40(A)3 applicable only for Incurred expenditure, Depreciation is not an incurred expenditure it is an Allowance. It does not apply for Depreciation.

Naga Praveen (Chartered Accountant) (304 Points)
Replied 07 April 2010

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.

swati (Article) (72 Points)
Replied 07 April 2010

Dear Naga

 

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


(Guest)

Depri will be allowed

Max Payne (employed) (2569 Points)
Replied 07 April 2010

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.


Attached File : 24 commissioner of income tax vs ram chand gobind prasad on 4 september 1984.pdf downloaded: 89 times

Naga Praveen (Chartered Accountant) (304 Points)
Replied 07 April 2010

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

Naga Praveen (Chartered Accountant) (304 Points)
Replied 07 April 2010

Dear Swati,

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

Max Payne (employed) (2569 Points)
Replied 07 April 2010

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....


Leave a reply

Your are not logged in . Please login to post replies

Click here to Login / Register  





Subscribe to the latest topics :

Search Forum:


expand_less