Ganesh Purohit, Senior Advocate
Q-1. New provision u/s 43B(h) regarding payment to supplier of Goods & and; Services registered under MSME Act, 2006
If a person filing ITR under presumptive taxation receives goods & services from registered entity under MSME Act and defaults in making the payment u/s 43B of I.T. Act, 1961 whether legally consequences of default in payment as per Sec 43B will be applicable?
Since sections of presumptive taxation starts with
“Notwithstanding anything to contrary contained in Sections 28 to 43C…”
Section 43B(h) starts with
“Not withstanding anything contained in any other provision of this Act…”
My point is provisions of Section 44 comes subsequently to 43B but non obstantive clause in Sec. 43B appears to have wider coverage so as to override non-obstantive clause under presumptive taxation?
Please give case laws on the issues, if any. CA Govind Agrawal
Answer:
The new provision introduced in the income tax act, 1961 as section 43B(h) by finance Act 2023 provides for disallowance of payments made to MSME and SME that is outstanding at the close of the accounting year and is outstanding for payment beyond the time limit prescribed under section 15 of the MSMED Act, shall not be allowed deduction in the year in which the payment remained payable. It will be allowed in the year of actual payment.
You question has been raised regarding applicability of this provision to the assessee submitting his return by following section 44AD, 44ADA, or 44AE . in that case whether the provision of section 43B(h) shall be applicable or not. In section 44AD, 44ADA or 44AE the phrase used is “not withstanding anything to the contrary contained in section 28 to 43C “, whereas section 43B(h) uses the phrase “notwithstanding anything contained in any other provision of this act”. The scope of section 43B(h) is wider than the provision of section 44AD, 44ADA and 44AE as they are limited to sections 28 to 43C, whereas section 43B(h) covers the entire IT Act.
The consequence is that section 43B(h) shall be applicable on provisions of presumptive tax as well. It is explained by Honourable Justice G P Singh in his book on Principles of statutory interpretation 11th edition on page 361as under:
“sometimes one finds two or more enactments operating in the same field and each containing a non obstante clause stating that its provisions will have effect not withstanding anything inconsistent therewith contained in any other law for the time being in force, the conflict in such cases is resolved on consideration of purpose and policy underlying the enactments and the language used in them. Another test that is applicable is that the later enactment normally prevails over the earlier one. It is also relevant to consider as to whether any of the two enactments can be described the special one in that case the special one may prevail over the more general one notwithstanding that general one is later in time.”
In view of the above the later amendment made by finance act 2023 in section 43B(h) should apply on the provisions of presumptive taxation, but section 44AD, 44ADA and 44AE exclude from consideration section 28 to 43C, this includes section 43B therefore new amendment shall have no application on the provisions of presumptive taxation.
It is also clarified in question No.24 of the FAQ issued on applicability of section 43B(h), and provides that section 43B(h) overrides all other provisions of the Act except sections 44AD, AE,ADA, BBB or 115VA, has put the controversy at rest.
This being new provision at present no case laws are available on this section, but FAQ has clarified the controversy.
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| 1. | Law of Evidence and Cross-examination in Tax and Allied laws – Frequently Asked Questions | Apr., 2024 | 1100.00 | 1300.00 | – | ||
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