Section 43B

Section 43B — the law in short

What the courts have decided on section 43B, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• Checkmate Services P Ltd v CIT Supreme CourtHelps department
  You deposited employees' PF late but before filing the return. Is the deduction saved?
  No. Employees' contributions are held in trust and are deemed income; the deduction depends on depositing them by the due date under the PF or ESI Act. Section 43B, which governs the employer's own liabilities, does not rescue them.
• M.M. Aqua Technologies Ltd v CIT Supreme CourtHelps taxpayerSuperseded by amendment
  I cleared accrued interest by issuing debentures to the lender. Does that count as payment under s.43B?
  Yes, on these facts and for the years before the law was changed. Issuing debentures that extinguished the liability to pay interest is actual payment, and Explanation 3C — a removal-of-doubts provision — only catches interest that stays unpaid and is merely converted into a fresh loan or borrowing.
• Maruti Suzuki India Ltd v CIT Supreme CourtHelps departmentValidity unconfirmed
  Can I claim a deduction for unutilised MODVAT credit sitting in my books at the year end?
  No. Unutilised credit is not a sum payable by you by way of tax, duty, cess or fee, so s.43B(a) has nothing to operate on. The duty on the inputs was payable by the supplier; what passed to you was the incidence, not the liability.
• CIT v Alom Extrusions Ltd Supreme CourtHelps taxpayer
  I paid the PF contribution after year end but before the return due date. Is the deduction gone?
  No, for the employer's own contribution. The deletion of the second proviso to s.43B and the amendment of the first proviso by the Finance Act 2003 are curative and operate retrospectively from 1 April 1988, so employer's contributions to provident and other welfare funds paid before the return due date are deductible.
• CIT v McDowell & Co Ltd Supreme CourtCuts both ways
  I have given the excise authorities a bank guarantee for unpaid bottling fee. Does that count as actual payment under section 43B - and is bottling fee even covered by section 43B?
  A bank guarantee is not payment, but bottling fee is outside section 43B altogether, so the deduction stood. The Supreme Court held that section 43B requires actual payment, meaning money must flow from the assessee to the public exchequer, and a guarantee of payment on a future event is not that. But it also held that tax, duty, cess or fee, by whatever name called, must be read ejusdem generis: the sum must belong to the genus of taxation, a compulsory exaction under the State's taxing power. Bottling fee under the Rajasthan Excise Act is the consideration for parting with an exclusive privilege - contractual, not an impost - so section 43B did not apply. The Revenue's appeal was dismissed.
• Allied Motors P Ltd v CIT Supreme CourtHelps taxpayer
  I paid the sales tax after year-end but within the time the statute allows. Can the AO disallow it?
  No. The first proviso to s.43B, inserted by the Finance Act 1987, operates retrospectively from 1 April 1984. A statutory liability paid after the close of the previous year but within the time allowed by the relevant statute and before the return due date is deductible in the year it accrued.
• Raj Kumar Bothra v DCIT High CourtHelps taxpayerValidity unconfirmed
  CPC disallowed my late-deposited PF and ESI under 143(1)(a). Was a summary adjustment even open to them?
  No, not for an intimation issued in December 2021. The Chhattisgarh High Court held the issue was genuinely debatable on that date, with conflicting High Court authority and the matter pending in the Supreme Court, so the officer had to take scrutiny under s.143(3) rather than adjust summarily.
• Bahar Infocons P Ltd v PCIT High CourtHelps taxpayer
  I over-reported income by mistake and the time to file a revised return has gone. Can it be fixed?
  The Commissioner cannot reject a revision application under s.264 solely because a revised return was not filed within the s.139(5) time. The power exists to relieve against over-assessment and reaches a mistake the assessee detects after the assessment is complete. Here provisions for bonus written back had been taxed twice across assessment years 2019-20 to 2021-22, and the revision applications were sent back to the Principal Commissioner to decide the adjustment on merits - the Court did not itself order relief.
• CIT v Pruthvi Brokers & Shareholders High CourtHelps taxpayer
  Goetze says I cannot make a claim except by revised return. Does that stop me raising it before the CIT(A) or the Tribunal?
  No. An assessee is entitled to raise before the appellate authorities not merely additional legal submissions but additional claims not made in the return. Goetze (India) was confined to the power of the assessing authority and the Supreme Court expressly said it does not touch the power of the Tribunal under s.254. The appellate authorities have jurisdiction to entertain a new ground; whether they exercise the discretion to admit it is a separate question.
• CIT v Noble & Hewitt (I) P Ltd High CourtHelps taxpayer
  The AO disallowed unpaid service tax under s.43B, but I never charged it to my P&L. Is that right?
  No. Section 43B regulates the timing of a deduction and operates only on a deduction actually claimed. Where the levy was carried as a liability in the balance sheet and never debited to the profit and loss account, there is nothing to disallow, and following the mercantile system makes no difference.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.