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Section 43b (it act) allowablity on prior period expenses

Sagar (ca final) (36 Points)

31 July 2016

Hello,

Demand has been raised in FY 2015-16 for provident fund(Employers contribution) relating to FY1993-2003 by the concern PF department after finalization of proceedings.The said provision created in the books of account during the year 2015-16.Payment for the same is made in the month of june 2016 i.e. before the date of filing of IT return.Whether the same is to be allow as expenditure u/s 43b being paid before due date of IT return or whether same is to be disallow being on account payment made in the next financial year of expenditure not related to FY 2015-16.

Please giveme the suggetion on above issue and also mention the case law if any decided on the above issue

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6 Replies

santu sen (Accounts officer) (73 Points)
Replied 31 July 2016

Making provision as on 31/03/2016 doesn't qualify it as prior period item .

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santu sen (Accounts officer) (73 Points)
Replied 31 July 2016

The deduction is allowable to the employer assessee if he deposits the contributions to welfare funds on or before the ‘due date’ of filing of return of income.
43B of the Income Tax Act, 1961allows for claiming tax deductions only on the basis of actual payments.

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santu sen (Accounts officer) (73 Points)
Replied 31 July 2016

The CBDT vide Circular No. 22/2015 dated 17-12-2015 [ F. No. 279/Misc./140/2015-ITJ ] has clarified regarding allowability of certain expenses u/s 43B of the Income Tax Act, 1961 as under:

No disallowance can be made u/s 43B of the I.T. Act if assessee deposits any sum payable by it by way of tax, duty, cess or fee by whatever name called under any law for the time being in force, or any sum payable by the assessee as an employer by way of contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of employees, on or before the ‘due date’ applicable in his case for furnishing the return of income under section 139(1) of the Act.