Deduction under Section 43B of the Income Tax Act

A deduction which is otherwise allowed as per the provisions of the Income Tax Act regarding —

a)   Any amount which is payable by the assessee by means of tax, duty, or fee, whatever it may be, under any existing law of the country ;

b)    Any amount which is payable by the assessee as an employer through contribution to any provident fund, gratuity fund, etc. made for the employees;

c)   Any amount which is payable by the employer as bonus or commission to the employees for the services provided by them;

d)   Any amount which is payable by the assessee as interest in connection with any loan from any finan­cial institution or a financial corporation of the State or an industrial investment corporation belonging to the State, according to the terms and conditions of the agreement guiding the said loan;

(e)  Any amount which is payable by the assessee for the interest part of any loan or advance borrowed from any bank according to the terms and conditions of the agreement relating to the said loan or advance; or

(f) Any amount which is payable by the assessee being an employer in exchange of any leave of his employee,
is allowed only in computing the income provided in section 28 of the Income Tax Act regarding the previous year in which the said amount was actually paid by him. It is not dependent on the previous year when the liability to pay the amount has incurred upon the assessee as per the method of accounting which is normally employed by him.This is provided in section 43B of the Income Tax Act, 1961.

This section overrides all other sections of the Income Tax Act, 1961.

Applicability of the section:

The section is applicable if the following essentials are present:

1. The assessee maintains books of accounts on mercantile basis;
2. Payment regarding the expenses are made on or before the due date of filing the return of income according to the provisions of sec 139(1);
3. The proof of such payment is given along with the return filed by the assessee.

This section is not applicable to any amount which is paid by the assessee on or before the due date for furnishing his income tax return under section 139(1) in connection with the previous year when the liability to pay the said amount was incurred and the proof of the payment is given by the assessee in his filed return.

The interest paid as per the provisions of the Customs Act for delay in the clearance of goods is not guided by this section.

Validity of the section:

The validity of this section was upheld in the reported case of Mysore Kirloskar Ltd v. Union of India (1986) 160 ITR 50 (Karnataka).