Section 43B(h) – MSME Invoice Paid Before Year End but After 45 Days

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This query is : Resolved

Arvind Gupta (Querist)

22 June 2026 Dear Expert,

I seek clarification regarding the applicability of Section 43B(h) of the Income Tax Act.

Facts:

I am a proprietor carrying on business under the name Lotus Fibre.
Purchases were made from suppliers registered as Micro/Small Enterprises (MSEs) under the MSMED Act.
Certain invoices were raised during April 2026.
The payments were not made within the MSMED prescribed period of 45 days.
However, the payments were actually made during December 2026, i.e., before 31 March 2027 and within the same financial year.
My Chartered Accountant has disallowed these expenses under Section 43B(h) and added them back to taxable income.

My query is:

Where an MSME invoice is paid after the prescribed MSMED period but before the end of the same financial year, is the expenditure allowable as deduction in that financial year or is it required to be disallowed under Section 43B(h)?

I would appreciate guidance on:

The correct interpretation of Section 43B(h).
Whether payment before 31 March allows deduction.
Relevant CBDT Circulars, judicial precedents, tribunal rulings, or professional guidance supporting the view.
Whether there are divergent views being followed in practice.

Thank you for your guidance.

Regards
Suresh Gupta
Proprietor – Lotus Fibre

Aashok Kumar Sharma online

Aashok Kumar Sharma

(Expert)

22 June 2026 Under Section 43B(h), if you fail to pay an MSME within the mandated 15 or 45 days, the expense must be disallowed for that financial year, even if you pay it before March 31st. The deduction can only be claimed in the financial year in which you actually make the payment. There is no relief for late payments made before the end of the financial year.

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