LIVE GST Certification Course by CA Arun Chhajer begins 27th April. Register Now!!

section 40A(3)

Aashish R (Chartered Accountant) (76 Points)

27 October 2007

whether purchase of fixed assets by cash exceeding 20000 comes under the perview of 40A(3).

Reply
Follow
Share

37 Replies

CA O.P. SINGH (O P Singh & Co.) (426 Points)
Replied 27 October 2007

No ... section 40 A (3) specifically exempt expenditure in capital nature.

2 Like

CA.Saibaburao Nanduri (Chartered Accountant) (3847 Points)
Replied 27 October 2007

Dear aashish ! ca omprakash aptly pointed out that this section relates expenditure debited to ' Trading & profit and loss account' or 'income and expenditure account'.

Late CA Sampat Jain (Chartered Accountant) (4772 Points)
Replied 27 October 2007

Section 40(A) earlier read as follows: (3) Where the assessee incurs any expenditure51 in respect of which payment is made, after such date (not being later than the 31st day of March, 1969) as may be specified in this behalf by the Central Government by notification in the Official Gazette, in a sum exceeding [twenty] thousand] rupees otherwise than by [an account payee cheque drawn on a bank or account payee bank draft], [twenty per cent of such expenditure shall not be allowed as a deduction] : The following sub-section (3) shall be substituted for the existing sub-section (3) of section 40A by the Finance Act, 2007, w.e.f. 1-4-2008 : (3)(a) Where the assessee incurs any expenditure in respect of which payment is made in a sum exceeding twenty thousand rupees otherwise than by an account payee cheque drawn on a bank or account payee bank draft, no deduction shall be allowed in respect of such expenditure SO EARLIER: [twenty per cent of such expenditure shall not be allowed as a deduction] AND NOW: no deduction shall be allowed in respect of such expenditure SO the position is this earlier expenditure was disallowed ......since capital expenditure was never allowed as expenditure , the question of disallowance did not arise. BUT , now no deduction is to be allowed inrespect of such expendiuture. Depreciation is an deduction allowed in repect of capital expenditure made . Therefore , now if capital expenditure is incurred in excess of RS 20000/- i n cash , deduction in respect of such expenditure , i.e. depreciaiton may be disallowed.

1 Like

SURESH KABRA (chartered accountants) (121 Points)
Replied 27 October 2007

as i think opinion of ca sampat jain is correct

Ketki (Business) (56 Points)
Replied 28 October 2007

Expenses which are debited to "Trading & Profit & Loss A/c" if inucrred in cash for Rs 20000 & above,comes under the scanner of 40(A)(3).

1 Like

Nirmal1986 (articles) (149 Points)
Replied 29 October 2007

so what r the account that will be afffected by purchase of fixed assets in cash exceeding 20000 and how the depreciation can be claimed as per both company account and it act

Vijay K. Agrawal (Service) (608 Points)
Replied 29 October 2007

yes. sec 40A applicable to all expenses, whether capital or revenue

Gupta B Gullapudi (PRACTICING CA) (42 Points)
Replied 16 April 2008

Dear all,

Pl... clarify with reference to 40 A (3), any payment exceeding 20K will be disallowed. In this connection, If any entity is paying the amount exceeding the limit of rs. 20000/- towards

a) salaries to staff

b) advance towards salary to staff

c) advance against expenses to be incurred

In all the above cases 40 A(3) is applicable? or is there any exception, if so please let me know the details.

Thanking u in advance

(Guest)

agar aap ni ca padi ho to mujhe bataye ke kaun se act mein likha specifically aloowed capital expenditure

Vijay K. Agrawal (Service) (608 Points)
Replied 22 May 2008

Yes, Applicable to all Three.

(Guest)

dear all

as per the amendment 2008-09 for 40A (3)

applicable only if expenditure for purchase of raw material , trading goods, expenditure on salary, expenditure deductible in computing business income...........

pl comment

narinder

welcome for further discusion

narinder (C.A.) (38 Points)
Replied 24 June 2008

dear

another finding in the book of ready reckoner of v.k. singhania

in scope of section 40A(3)

para 49.3

read as follows

section 40A(3) is applicable if an assessee purchase a depreciable asset.

ca narinder

Hemant Kyal (Service) (348 Points)
Replied 10 July 2008

no section 40A(3) deals with expenses that are claimed as deductions from income and hence does not cover capital Expenditure

umesh (http://ussco07.blogspot.com/) (50 Points)
Replied 11 July 2008

Dear All,

As per the amendment made in the A.Y. 2008-09 whole of the amount will be disallowed if payment in respect of the expenditure is made in excess of Rs. 20000/- other wise than by way of account payee cheque or account payee bank draft.

Applicability :

This rule is not apply in respect of the expenditure no claimed as deduction u/s 30 to 37.
This rule is not applicable for purchase of a capital assets not meant resale. ( Circular No. 34/05.03.2007 )
This rule is applicable even in respect of the a advance for an expenditure covered u/s 30 to 37.

As per the circular No. 34/5.3.1970 repayment of loans or payment towards the purchase price of capital assets does not attract provisions of section 40A(3).

Section 40A(3) is applicable only for computing income under the heads of Profit & Gains of Business or Profesion and under Income from other sources.