Capital expenditure incurred in cash : Depreciation Disallowed
CIRCULAR No. 2/2018 Dated 15.02.2018
20. Disallowance of depreciation under section 32 and capital expenditure under section 35AD on cash payment.
20.1 Sub-section (3) of section 40A of the Income-tax Act provides that revenue expenditure incurred in cash exceeding certain monetary threshold is not allowable except in such circumstances as specified under Rule 6DD of the Income-tax Rules, 1962. However, there was no provision to disallow the capital expenditure incurred in cash. Further, section 35AD of the Income-tax Act provides inter alia for investment-linked deduction on the amount capital expenditure incurred, wholly or exclusively for the purposes of business, during the previous year for a specified business except capital expenditure incurred for acquisition of any land or goodwill or financial instrument.
20.2 In order to discourage cash transactions even for capital expenditure, section 43 of the Income-tax Act has been amended to provide that where an assessee incurs any expenditure for acquisition of any asset in respect which a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account payee bank draft or use of electronic clearing system through a bank account, exceeds ten thousand rupees, such expenditure shall be ignored for the purposes of determination of actual cost of such asset.
20.3 Section 35AD of the Income-tax Act has also been amended to provide that any expenditure in respect of which payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or an account payee bank draft or use of electronic clearing system through a bank account, exceeds ten thousand rupees, no deduction shall be allowed in respect of such expenditure.
20.4 Applicability: These amendments take effect from 1st April, 2018 and will, accordingly, apply from assessment year 2018-19 and subsequent assessment years.
Free study material on Income Tax Depreciation
New Income Tax Depreciation Rates w.e.f 01.04.2017
Depreciation Rates under Income Tax [ As amended by Finance Act 2018]
Capital expenditure incurred in cash : Depreciation Disallowed w.e.f AY 2018-19
Disallowance of cash payments for capital Asset / expenditure w.e.f 01.04.2017
Partly Cash Expenditure on Asset – entire amount Disallowed ? Budget 2017-18 Suggestions
15% depreciation on oil wells notified by CBDT
Judgments on Income Tax Depreciaiton
60% depreciation allowed on Printer being part of computer system : Madras HC
Computerized machines are not Computers, 60 % Depreciation not allowed
Bank ATMs eligible for 60% Depreciation
Depreciation on ROC Fees Capitalised allowed : High Court
Provisions of section 40(a)(i) are not attracted on Depreciation : ITAT
section 40(a)(i) No TDS Disallowance if Expenses Capitalised
Depreciation is allowed even before the date of Inauguration if the Asset is ready to use : ITAT
Depreciation on capitalization of foreign gain/loss not allowed as it does not satisfy Section 43A : HC
Depreciation on Increased cost of Asset due to Withdrawal of exemption of Custom duty certificate has to be computed from Year of Withdrawal : HC
Depreciation on revalued assets allowed to successor if same was allowed to predecessor : ITAT
Additional depreciation allowed even if acquisition ; installation is not in same year
Depreciation on Road constructed on BOT basis allowed as Intangible asset : ITAT