Any payment of sales tax, employer’s contribution to any provident fund, superannuation fund or gratuity fund, or any other fund for the welfare of employees will be allowed only in computing the income of that previous year in which such sum is actually paid by him. In case a deduction has already been claimed on accrual basis in any earlier previous year, it will not be allowed again in the year in which it is actually paid.
These payments are :
(a) any sum payable by the assessee by way of tax, duty, cess or fee by whatever name called, under any law for the time being in force.
(b) any sum payable by the assessee as an employer by way of contribution of any provident fund, or superannuation fund or gratuity fund or any other fund for the welfare of employees.
(c) any sum referred to in clause (ii) of sub-section (1) of section 36, i.e., bonus or commission payable to employees.
(d) any sum payable by assessee as interest on any loan or borrowing from any public financial institution or a State Financial Corporation or a State Industrial Investment Corporation in accordance with the terms and conditions governing such loans or borrowing.
Deduction regarding these payments shall be allowed if such payments are actually made before filing of return u/s 139(1).
(e) any sum payable by the assessee as interest on any term loan from a scheduled bank in. accordance with the terms and conditions of the agreement governing such loan.
(f) Any amount payable by the assessee as an employer in lieu of any leave at the credit of employee shall be allowed to be debited only if it is made in accordance with the provsis of section 43B.
In case deduction for the above mentioned amount has already been claimed upto prevktis year ending on 31st March 2001, the same will not be considered for the deduction rn the year in which it is actually paid. [Section 43B Explanation 3B ]
U/s 43B (provisions) the above payments shall be allowed in following manner :
(i) If all these payments, as mentioned above, are actually paid by the end of previous year i.e. 31st March, such payments shall be fully allowed.
(ii) If payments [as mentioned above at (b) above] of provident fund or employees’ state insurance contribution is paid before due date prescribed under P.F. Act or E.S.I. Corporation Act, such payment shall be fully allowed. In case these payments are made after due date, these shall never be allowed.
(iii) If all the above payments are paid after 31St March but before prescribed date of filing of return, it shall be allowed to be debited in the year to which these payments belong. If it is paid after prescribed date, the payment shall be allowed to be debited in the year in which payment is made.
(iv) In case payments as mentioned above are made by cheque, the proof of their encashment must be submitted within 15 days from due date/prescribed date.
Important points :
(i) Section 43B is applicable only if the assessee maintains books of account on mercantile/due basis. However, if the books of account are maintained on ‘cash basis’ then section 43B shall not be applicable. In such a case, all the above mentioned payments for any previous year (like any ether expense) shall be allowed as deduction only if the amount is paid during the same previous year. Thus, if such payment for any previous year is made after the close of previous year but on or before filing the return of income of that previous year, deduction shall be allowed in the previous year in which the payment is actually made.
(ii) Section 43B is not applicable on deduction covered u/s 36(1)(va).