Disallowance of fixed asset

[A RAVINDRA]

If a fixed asset worth say 250000/- is purchased by cash payment, will the depreciation be disallwed on the ground that the asset is procured through cash payment exceeding Rs 20000/-. Please clarify

AI Summary

Depreciation on Rs. 250,000 asset in cash challenged under Section 40A(3); consider Rule 6DD exceptions, avoid cash deals. A query was raised regarding the disallowance of depreciation on a fixed asset purchased for Rs. 250,000 in cash, exceeding the Rs. 20,000 limit under Section 40A(3) of the Income Tax Act. Respondents generally advised that depreciation should not be disallowed as it is a statutory allowance for assets used in business, not an 'expenditure' as per the Profit & Loss account. However, there is a risk of litigation, and it is recommended to avoid cash transactions. Rule 6DD exceptions and relevant case laws may support the claim for depreciation despite the cash payment.