|The Tax Publishers2021 TaxPub(DT) 0397 (Del-Trib)
INCOME TAX ACT, 1961
Since provisions of section 40A(3) are not attracted in case of capital expenditure, the AO was not justified in disallowing depreciation on fixed assets purchased by assessee in cash.
Business disallowance under section 40A(3) - Applicability of provision - Capital expenditure incurred in cash in acquiring fixed assets - Disallowance of deposits
AO disallowed the depreciation on the capital expenditure of Rs. 5,35,468 which had been stated to have been incurred by the assessee in cash. Thus, one of the points in this appeal was on section 40A(3) wherein the AO disallowed depreciation on capital assets purchased in cash applying section 40A(3) which was upheld by the first appellate authority. On higher appeal, the assessee canvassed that the purchase of fixed assets in cash was not an allowable expenditure nor was it claimed as an expenditure, besides the fact that depreciation is not an expenditure but is a mandatory allowance under the Act. Held: Assessee submitted that capital expenditure of Rs. 5,35,468 was incurred in cash for acquiring various fixed assets and AO disallowed the depreciation on the same. He submitted that the expenditure towards the acquisition of capital assets has not been debited to the Profit and Loss account and thereby it has not been claimed as an expenditure. He submitted that the provisions of section 40A(3) can be invoked only in respect of expenditure which are otherwise allowable as deduction under section 28 to 37 of the Act. He further submitted that depreciation cannot be considered to be an expenditure but it is an allowance, therefore, section 40A(3) cannot be invoked to disallow depreciation arising out of fixed assets purchased in cash.
Applied:Saral Motors & General Finance Ltd. v. ACIT (2009) 121 ITD 50 (Del) : 2009 TaxPub(DT) 0548 (Del-Trib)
FAVOUR : In assessee's favour.
A.Y. : 2007-08 & 2008-09
IN THE ITAT, DELHI 'B', NEW DELHI BENCH
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