Section 43B

[BHARAT COKING COAL LIMITED]

A particular local levy was being challenged in the Hon'ble High Court by the buyers. On the instruction of the Hon'ble High Court, the same was being collected but not deposited. Since the issue was subjudice the non payment of the local levy was not being disallowed u/s 43B of Income Tax Act. However during FY 15-16, the Hon'ble High Court direct to deposit the local levy.

Now my query is whether the preexisting liability of the local levy not paid till 31.03.16 to be disallowed in the Tax Audit Report for FY 15-16. Say ₹ 200 was collected & only ₹ 140 could be paid upto 31.03.16 (Rs 60 not paid by the buyers who have challenged the levey). Whether ₹ 60 (Rs 200-140) to be disallowed as preexisting liability not paid.

As far treatment of current year local levy collected & paid upto Return Filing Date is concerned, it is not an issue...

Expecting an early reply..

[Ganeshan Kalyani]

In my view of the outstanding iability as on 31st March is paid before filing of tax audit report the same shall be allowed.

AI Summary

Payment timing under Section 43B determines deductibility when outstanding liabilities are settled before tax audit filing. The issue concerns a local levy collected under court instruction while subjudice and partly unpaid at year end; the provided view is that a preexisting liability outstanding on 31 March will be allowed if it is paid before filing the tax audit report, thereby meeting the payment timing requirement under Section 43B.