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Notified Area Water Charges Not
If Any GIDC Area, Notified Area Charge not paid at the time filing of Income Tax Return than is it Allowed in Income Tax ?
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| This depends on the method of accounting followed: 1. Mercantile System (Accrual Basis): If the assessee follows mercantile accounting, expenses are deductible when they accrue — not when paid. So, GIDC water charges that have accrued during the year (bill raised/received) are allowable even if not paid before the ITR filing date. 2. Cash System: If cash basis is followed, deduction is only on actual payment — unpaid charges are not deductible for that year. 3. Section 43B Does NOT Apply Here: Section 43B lists specific items (taxes, PF/ESI, bonus, interest to financial institutions, etc.) that are deductible only on actual payment. Water charges to GIDC/Notified Area Authority are NOT covered under Section 43B — so the Section 43B payment-before-due-date condition does not apply. 4. Practical Position: For a mercantile-basis assessee, accrue the GIDC water charges as an expense and claim deduction even if payment is pending — this is fully allowable under Section 37(1) as a business expenditure. Maintain the GIDC demand notice/bill as supporting documentation. 5. Note: Ensure there is no specific provision in your State's industrial area regulations that treats these as 'statutory dues' — if they are, Section 43B may arguably be extended, though the current legal position supports deductibility on accrual. |
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