SC upholds the constitutional validity of Section 43B of the Income Tax Act, only actual payment is deductible - Synopsis
Parul Madaan 29 Apr 2020

The respondent is liable to pay income tax on the profits and profits of their business were found to be aggrieved with the inclusion of clause (f) in Section 43B and contended that Section 145 of the 1961 Act gives them the option of accounting method and, accordingly, they measured their profits and company gains in accordance with the commercial system. Profit and expenditure are assessed on the basis of accrual or provision, and not on the basis of actual receipt/payment, as per the mercantile system. And according to the appellant, the wide purpose of enacting Section 43B with respect to the stated deductions referred to in it was to protect the larger public interest primarily of revenue, including employee welfare. Clause (f) fits within the scheme and shares ample nexus with the specific target.

Accordingly, the impugned judgment of the Division Bench of the High Court was reversed and clause (f) in Section 43B of the Income Tax Act, 1961 Act was held to be constitutionally valid and operative for all purposes.


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