Re: [aaykarbhavan] Re: Section 40A(3)

Sirji,
            Always excellent. I am from another platform. U care for Professionals .
God bless you,
Regards,
C A Shah D J
USA

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From: M.K.KRISHNAN <emkaykay2002@yahoo.com>
To: aaykarbhavan@yahoogroups.com
Sent: Friday, 26 July 2013 8:24 PM
Subject: [aaykarbhavan] Re: Section 40A(3)

 

 

Dear Karim Meghani,

  Section 40A(3) applies only to revenue expenditure incurred and not to capital expenditure. When capital expenditure is incurred in cash, section 40A(3) cannot be invoked by disallowing the depreciation claimed on the capital asset.

 The CBDT in Circular : No 34 [F. No. 13A/92/69-IT(A-II)], dated 5-3-1970 has clarified in para 2 as under:

 2. The provisions of section 40A(3) would apply in computing the income under the heads "Profits and gains of business or profession" and "Income from other sources" as per section 58(2). All payments in excess of Rs. 2,500 at one time whether for goods or services obtained for cash or credit, which are deductible in computing the income, have to be made by crossed cheque or bank draft.  Thus, the price of goods purchased for resale or use in manufacturing process or payments for services will be covered by the provisions of section 40A(3).  However, the section will not apply to repayment of loans or payment towards the purchase price of capital assets such as plant and machinery not for resale.

Regards

CA.M.K.Krishnan

Vellore

Tamilnadu

--- In aaykarbhavan@yahoogroups.com, Karim Meghani wrote:
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> Hi,
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> This is regarding section 40A(3) of the Income Tax Act. If payment is made more than Rs.20000 in cash then the expenditure is to be disallowed subject to conditions in Rule 6DD. But what if the payment more than Rs.20000 is made for a fixed asset? whether the depreciation will be disallowed (depreciation disallowance is given in the Ready Reckoner) or is it allowed and nothing is to be done.I think there is some circular for the same.
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> Awaiting Reply,
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> Karim
>

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