The amount of contribution made by the assessee towards the fund...

The amount of contribution made by the assessee towards the fund for payment of leave encashment to its employees does not qualify for deduction as expenses u/s 43B of the Act. The proviso to Section 43B relates only to the liability incurred by actual payment in the previous accounting year. As per Section 43B, deduction is allowed where the liability to pay such sum was incurred according to the accounting method employed, and the sum was actually paid by the employer in the previous year. The assessee cannot derive benefit from the Bharat Earth Movers case, as Section 43B(f) applies prospectively post its enactment. The HC rightly disallowed the deduction, as the liability incurred did not qualify u/s 43B(f).

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