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Clarification as regards to Section 43B

M Agrawal (Student) (127 Points)

12 April 2010

A Company has not paid the Employer's Contribution of PF for the last 3 years (i.e. for 2007-08, 2008-09, 2009-10). But all the dues have been cleared after 31-March-2010 but before 30-September-2010. The details are:

Rs. 25,00,000 for 2007-08, Rs. 27,00,000 for 2008-09 & Rs. 30,00,000 for 2009-10 ( Currenty Year) = Total Rs. 82 lacs paid on 10-April-2010

Whether I will be able to get the total deduction of Rs. 82 lacs for the current year 2009-10 (A.Y. 2010-11) under the head 'Business Income'?

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9 Replies

Nicky (Chartered Accountant) (245 Points)
Replied 12 April 2010

You are entitiled to calim an expenditure provided you had disallowed all u/s 43B in repsective years...

Say if you had not debited these expenditures in prior years to P & L then for the prior years they will become Prior Period Expendtire and wont be allowed...

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Amir (Learner) (4016 Points)
Replied 12 April 2010

Dear Friend,

I have a different opinion on this from Nicky Sir -

Rs. 30 lacs (for FY 2009-10) will be allowed as deduction in FY 2009-10 (AY 2010-11)

Rs. 25 Lacs (for FY 2007-08) & Rs. 27 Lacs (for FY 2008-09) will be allowe as deduction in FY 2010-11(AY 2011-12) {SINCE THESE AMOUNT WERE NOT PAID BEFORE THE DUE DATE OF FILING RETURN OF INCOME FOR THE YEAR IN WHICH THE LIABILITY WAS INCURRED & HENCE CAN ONLY BE CLAIMED IN THE YEAR OF PAYMENT i:e FY 10-11}

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Rajat Singhal CA,CS,CFA (Senior Manager (F&A)) (254 Points)
Replied 12 April 2010

I do agree with Amir Bhai....

Nicky (Chartered Accountant) (245 Points)
Replied 12 April 2010

Dear Amir,

Even I admit the same as you have stated as far as FY 2009-10 is concerned ...

But for prior years say they expenditures have not been disallowed u/s 43B then how does one allow them in the current year...

I mean to say in particular that the expenditures in the given case if have not been debited to P & L in the earlier years and subsequently diallowed u/s 43B, admissibilty of the same in the current year is a question

Amir (Learner) (4016 Points)
Replied 12 April 2010

Dear Nicky Sir,

I got ur concern....

But before I reply to that I would like you to answer the difference in these two scenarios

1) Expenditure debited to P/L A/c & then dissallowed in the computation

2) Expenditure not debited to P/L A/c & hence not claimed at all

For me there is no difference at all in the above two situations.....bottom line is in both cases deduction was denied. May be I am overlooking something..

If I am not wrong the reason for ur stand is the case of Noble Hewiit (Delhi HC)...But sir that case was different the judgment was in respect of service tax being collected from customers as a part of revenue & the decision was that since it was neither credited to P/L a/c nor debited to P/L A/c then the question of dissallowance dos not arise.

Further Sec 43B never requires that an assesee should first claim the expense & then dissallow it (In fact the word dissallow is not there in the section)-

Extract of Sec 43B -

"Notwithstanding anything contained in any other provision of this Act a deduction otherwise allowable under this Act in respect of— .........................................

.....................................

shall be allowed (irrespective of the previous year in which the liability to pay such sum was incurred by the assessee according to the method of accounting regularly employed by him) only in computing the income referred to in section 28 of that previous year in which such sum is actually paid by him "

Sir, I hope the above clarifies ur doubt..

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CA LOVELY ARORA (C.A. B.Com (H) Graduate) (2151 Points)
Replied 12 April 2010

All amount of contribution towards PF by employer is eligible for deduction in P.Y. 2009-10 itself ...............(i.e. Rs. 82 Lacs can be claimed as expenditure in accounts of A.Y. 2010-11)...........