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Loophole of section 43(b)-actual payment

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Querist : Anonymous

Querist : Anonymous (Querist)

11 May 2016 our organisation has deducted tds after considering leave encashment for the financial year 2015-16.
But actual payment of the same has not yet been received and is generally received in the month of oct-nov.
However in the books of accounts cash payment has been shown.
And co escapes from levy of section 43(b)
why such loophole is there in the provision???????

CA Himanshu Ojha

CA Himanshu Ojha (Expert)

11 May 2016 There is no loophole in the provision. Provision of Section 43 (b) clearly states any sum payable by the assessee as an employer in lieu of any leave at the credit of his employee shall be allowed as deduction only in the previous year in which such sum is actually paid. This is irrespective of the previous year in which the liability to pay such sum was incurred by the assessee.
Here as you said that your employer has shown the cash payment in the books however in actual he has not paid. So here your employer is adopting wrong policies & it is contrary to law.