Section 43B of the Income-tax Act, 1961 - Business disallowance

Last updated: 09 October 2007

Court :
HIGH COURT OF CALCUTTA

Brief :
Section 43B of the Income-tax Act, 1961 - Business disallowance - Certain deductions to be allowed only on actual payment - Whether section 43B(f) is to be struck down being arbitrary, unconscionable and de hors Apex Court decision in case of Bharat Earth Movers v. CIT [2000] 245 ITR 428/112 Taxman 61 - Held, yes Facts The assessee-company filed writ contending that section 43B(f) was ultra vires the law of the land in view of the fact that the assessee being a body corporate was entitled to maintain its accounts by mercantile system of accounting which is permissible in law. Hence, the amount payable to its employees as leave encashment was to be shown in the balance sheet as a liability for each and every year and the employer was entitled to have deduction not only in the year in which it was actually paid, but also for the years when provision was made. Single Judge dismissed the writ petition. On appeal to the Division Bench :

Citation :
Exide Industries Ltd. v. Union of India