Sunday, 27 August 2023

Sec 43B- expenses deductible only on actual payment:


A. As per Sec 43B of the Income Tax Act, certain expenses as indicated below are deductible only when actually paid by the assessee:

1. Taxes, Duties, and Fees: Any sum payable as tax, duty, cess, or fees by any name under any law.

2. Contributions to provident funds, superannuation funds, gratuity funds, or other welfare funds for employees.

3. Any sum payable as bonus and commission to an employee.

4. Any interest payable on loans or borrowings from public financial institutions, Central or State Government, or NBFC (applicable from assessment Year 2024-25) declared by the Central Government.

5. Any interest payable on loans or advances from scheduled banks or cooperative banks.

6. Any sum payable to an employee for unused leave.

7. Any sum payable to the Indian Railways for the use of assets.

8. Any amount paid late under section 15 of the Micro, Small and Medium Enterprises Development Act. (applicable from assessment Year 2024-25)

Some selected case laws on Sec 43B:
1. Full Bench of Hon. Supreme Court has held in the case of Checkmate Services P. Ltd. vs CIT 3614 (2022) (09) (SC) that belated deposit of employees’ contribution are not deductible under section 43B, if paid beyond the time prescribed under the relevant Act.

2. Hon Supreme Court in the case of M.M. Aqua Technologies Ltd. v CIT [2021] 129 taxmann 145 (SC), has held that issue of debentures against the outstanding interest liability as final discharge of liability would be treated as actual payment of interest and such amount need not to be disallowed under Section 43B.

3. Interest due on payment of Municipal Tax of property is not considered as tax, hence it will not be disallowed section 43B. (CIT vs. Orient Bewarages Ltd., (2000) 164CTR (Kolkata) 529.

4. Allahabad High Court has held, in the case of CIT vs. Sinyaovi Industries Ltd.,(2014) 111 DTR (Allahabad) 274 that interest on excise duty is extended liability and it will not be allowed and section 43b will apply.

5. Electricity duty is not falling within the preview of section 43B, hence if paid after due date, is an admissible expenses. (CIT vs. Urja Vikas Nigam Ltd. (2011)322 ITR 579(guj).

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