Disallowance of depreciation under section 32 and
capital expenditure under section 35AD on cash payment -
Under the existing provisions of the Act, revenue
expenditure incurred in cash exceeding certain monetary threshold is not
allowable as per sub-section (3) of section 40A of the Act except in specified
circumstances as referred to in Rule 6DD of the Income-tax Rules, 1962.
However, there is no provision to disallow the capital expenditure incurred in
cash. Further, section 35AD of the Act , inter-alia provides 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.
In order to discourage cash transactions even for
capital expenditure, it is proposed to amend the provisions of section 43 of
the Act 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.
It is further proposed to amend section 35AD of
the Act 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.
These amendments will take effect from 1st April,
2018 and will, accordingly , apply in relation to the assessment year 2018-19
and subsequent years. [Clauses 13 & 16]
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