Executive Overview & Quick Highlights: In the statutory workflow of corporate and business tax audits conducted under Section 44AB of the Income-tax Act, 1961 (and transitioning into the modernized architecture of the Income-tax Act, 2025), few disclosure obligations carry greater immediate revenue impact than Clause 26 of Form 3CD. Clause 26 serves as the primary verification schedule for the statutory disallowance and deduction framework enacted under Section 43B. Under the general mercantile (accrual) system of accounting, business enterprises debit expenditures in their financial statements the moment a liability accrues, regardless of whether actual cash payment has been remitted. Section 43B operates as a formidable statutory non-obstante exception to this accrual principle: it mandates that certain specified statutory dues, employee liabilities, and financial borrowing obligations can be claimed as an allowable tax deduction only in the previous year in which they are actually paid, irrespective of the method of accounting regularly employed by the assessee.
The legislative grace period provided under the first proviso to Section 43B permits deductions for the year of accrual if the sum is actually discharged on or before the due date for furnishing the return of income under Section 139(1). However, the operational audit of Clause 26 requires tax auditors, corporate CFOs, and finance controllers to navigate razor-sharp technical boundaries. Following the landmark Supreme Court ruling in Checkmate Services P. Ltd. v. Commissioner of Income Tax, the long-standing controversy regarding delayed deposits of employee contributions to Provident Fund (PF) and Employees State Insurance (ESI) was decisively settled: employee contributions governed by Section 36(1)(va) do NOT enjoy the relaxed Section 139(1) deadline of Section 43B and must be deposited by the statutory due date under the respective welfare acts (the 15th of the following month), failing which they are permanently disallowed as deemed income! Furthermore, tax auditors must master the anti-avoidance mechanics of Explanations 3C, 3CA, 3D, and 3DA to Section 43B (where converting unpaid bank interest into loans, debentures, or equity shares is statutorily deemed NOT to be actual payment), the distinct accrual mechanics of leave encashment under the Supreme Court precedent in Bharat Earth Movers, and the structural carve-out of Section 43B(h) for micro and small enterprise (MSME) payments. This definitive masterclass provides tax audit teams with an exhaustive technical guide to Clause 26 disclosures, statutory payment tracking, worked numerical case studies, and end-to-end audit automation inside the assureOffice ecosystem.
- Statutory Architecture of Section 43B: Comprehensive deconstruction of Clauses (a) through (g), covering taxes, duties, employee bonuses, bank interest, leave encashment, and railway asset dues.
- The First Proviso vs Section 139(1) Due Date: Chronological timelines for discharging accrued liabilities to preserve current-year deductions.
- The Landmark Checkmate Ruling & Employee Welfare Dues: Why Section 36(1)(va) employee PF/ESI contributions are excluded from Section 43B and permanently disallowed upon delayed deposit.
- Interest Restructuring Anti-Avoidance (Explanations 3C to 3DA): Why restructuring or funded interest term loans (FITL) from scheduled banks, cooperative banks, and NBFCs cannot be reported as paid.
- Form 3CD Clause 26 Reporting Mechanics: Granular walkthrough of Sub-clauses 26(A) and 26(B) distinguishing pre-existing liabilities from current-year accrued obligations.
- 7 Real-World Case Studies: Worked numerical illustrations covering leave encashment provisions, bank debt settlement, GST DRC-03 payments, bonus allocations, and PF delays.
- Technology Automation: Seamless ledger auditing, challan date extraction, and automated Clause 26 disclosure generation using assureTax and assureFinancials.
1. Statutory Architecture & Legislative Logic: Section 43B & Clause 26
To conduct a rigorous tax audit, one must analyze the legislative intent behind Section 43B. Parliament enacted Section 43B via the Finance Act, 1983 to curb the pervasive corporate practice of claiming substantial deductions on accrued statutory dues, taxes, and employee benefits while deferring actual remittances for years or tying them up in litigation. Section 43B strictly aligns tax deductions with actual sovereign and stakeholder remittances.
The table below summarizes the statutory scope of Section 43B liabilities and their corresponding reporting standards under Clause 26 of Form 3CD:
| Sub-Clause of Section 43B | Nature of Covered Liability | Qualifying Payment Due Date | Consequence of Delayed Payment |
|---|---|---|---|
| Section 43B(a) | Any tax, duty, cess, or fee, by whatever name called, under any law for the time being in force (GST, Customs, Property Tax, Municipal Dues). | On or before the return filing due date under Section 139(1). | Disallowed in year of accrual; allowed as deduction in subsequent year of actual payment. |
| Section 43B(b) | Any sum payable by the assessee as an employer by way of contribution to any provident fund, superannuation fund, gratuity fund, or other employee welfare fund. | On or before the return filing due date under Section 139(1). | Disallowed in current year; allowed in the year in which actual payment is remitted to the fund. |
| Section 43B(c) | Any sum payable to an employee as bonus or commission for services rendered, where such sum would not have been payable to him as profits or dividend. | On or before the return filing due date under Section 139(1). | Disallowed in current year; allowed in the year of actual payment. |
| Section 43B(d) | Any sum payable as interest on any loan or borrowing from any Public Financial Institution (PFI), State Financial Corporation, or State Industrial Investment Corporation. | On or before the return filing due date under Section 139(1). | Disallowed in year of accrual; allowed upon actual payment. Conversion into loan/equity deemed NOT paid. |
| Section 43B(e) | Any sum payable as interest on any loan or advance from a Scheduled Bank or a Co-operative Bank (other than primary agricultural credit society). | On or before the return filing due date under Section 139(1). | Disallowed in year of accrual; allowed upon actual payment. Explanations 3C & 3CA prohibit loan restructuring relief. |
| Section 43B(da) | Any sum payable as interest on any loan or borrowing from a Deposit-taking NBFC or Systemically Important Non-Deposit NBFC. | On or before the return filing due date under Section 139(1). | Disallowed in year of accrual; allowed upon actual payment. Conversion into debt/shares deemed NOT paid. |
| Section 43B(f) | Any sum payable by the assessee as an employer in lieu of any leave at the credit of his employee (Leave Encashment). | On or before the return filing due date under Section 139(1). | Disallowed in year of accrual; allowable only in the year of actual cash disbursement to employees. |
| Section 43B(g) | Any sum payable to the Indian Railways for the use of railway assets (demurrage, freight charges, siding lease rent). | On or before the return filing due date under Section 139(1). | Disallowed in year of accrual; allowable in the year of actual settlement. |
| Section 43B(h) | Any sum payable to a Micro or Small Enterprise beyond the time limit specified in Section 15 of the MSMED Act, 2006 (15 days / 45 days). | Strictly within 15 days (no agreement) or 45 days (written agreement) under Section 15 MSMED Act. | First Proviso DOES NOT apply! If unpaid within 45 days, strictly disallowed in current year even if paid before ITR deadline! |
2. Deep-Dive Technical Mechanics: Clause 26 Reporting Architecture
In Form 3CD, Clause 26 is divided into two distinct forensic reporting buckets designed to track the lifecycle of liabilities from accrual to discharge:
2.1 Sub-Clause 26(A): Pre-Existing Liabilities Incurred in Prior Years
Sub-clause 26(A) requires the tax auditor to report on liabilities that were incurred in an earlier previous year but were not allowed as a deduction in that year because they remained unpaid beyond the Section 139(1) due date of that prior year. The auditor must disclose:
- Whether the liability was paid during the previous year under audit, along with the date and amount of payment.
- Whether the liability remained unpaid at the end of the previous year under audit.
If a pre-existing liability is paid during the current financial year, it becomes an allowable tax deduction in the current year, providing a downward adjustment to taxable business income under Schedule BP of the income tax return. Tax teams utilizing assureTax track these pre-existing disallowance registers across consecutive assessment years to ensure legitimate deductions are never missed.
2.2 Sub-Clause 26(B): Liabilities Incurred in the Current Financial Year
Sub-clause 26(B) requires the tax auditor to report on liabilities covered under Section 43B that accrued or were incurred during the current previous year under audit. The auditor must verify and report:
- Liabilities that have been paid on or before the due date for furnishing the return of income under Section 139(1) (these amounts are allowable in the current year).
- Liabilities that have NOT been paid on or before the Section 139(1) due date (these amounts are disallowed under Section 43B and added back to taxable income).
The tax auditor must obtain certified challans, bank statements, and reconciliation sheets showing the exact dates on which each remittance was cleared through the banking system.
3. Multi-Act Interplay: The Checkmate Ruling & Employee Welfare Disallowances
One of the most consequential tax controversies of the last three decades centered on the interplay between Section 43B(b) and Section 36(1)(va) regarding employee contributions to welfare funds.
3.1 Distinguishing Employer vs Employee Contributions
Under Indian labor laws, a monthly payroll deduction consists of two distinct components:
- Employer Contribution: The company's own statutory contribution (e.g., 12% matching PF contribution). This falls squarely under Section 43B(b). Because it is governed by Section 43B, the company can deposit its matching employer contribution at any time up to the Section 139(1) return filing deadline (e.g., October 31 for corporate audit assessees) and claim full tax deduction in that financial year!
- Employee Contribution: The 12% deducted from the employee's gross monthly salary. Under Section 2(24)(x), the moment an employer withholds money from an employee's salary, that withheld amount is statutorily treated as income received by the employer. Under Section 36(1)(va), the employer is granted a tax deduction for this income only if such sum is credited by the assessee to the employee's account in the relevant fund on or before the due date specified in the respective welfare act (e.g., the 15th of the following month under the Employees' Provident Funds Scheme, 1952).
3.2 The Supreme Court Landmark Judgment in Checkmate Services (2022)
For years, multiple High Courts held that employee contributions could also be deposited up to the Section 139(1) due date by relying on the non-obstante clause of Section 43B. However, the Supreme Court of India in Checkmate Services P. Ltd. v. Commissioner of Income Tax (Civil Appeal No. 2833 of 2016, decided on October 19, 2022) authoritative settled the law:
- The Supreme Court held that Section 43B operates strictly on liabilities that are an expenditure or obligation of the employer itself. Section 43B does not govern employee contributions.
- Employee contributions are held by the employer in trust as a fiduciary. When deducted, they constitute deemed income under Section 2(24)(x).
- Deduction under Section 36(1)(va) is strictly conditional upon deposit on or before the statutory due date prescribed by the labor welfare statute (the 15th of the succeeding month, plus any official grace period).
- Consequently, if an employer deposits employee PF/ESI on the 16th of the month, the entire employee contribution is permanently disallowed and taxed as business income! It can NEVER be allowed as a deduction in a subsequent year under Section 43B!
- In Form 3CD, employee contribution defaults are reported in Clause 20(b), whereas employer contributions are audited and reported under Clause 26.
4. Anti-Avoidance on Bank Debt: Explanations 3C, 3CA, 3D & 3DA
Another aggressive corporate restructuring practice involved assessees negotiating debt restructuring packages with banks when they defaulted on interest payments. Borrowers obtained Funded Interest Term Loans (FITL), converted unpaid accrued interest into additional loan principal, debentures, or zero-coupon bonds, and argued before tax authorities that the original interest liability was discharged through novation of contract, claiming full Section 43B deductions without paying a single rupee of cash!
To eliminate this artificial avoidance, Parliament enacted a series of strict statutory explanations:
- Explanation 3C: A deduction of any sum being interest payable under clause (d) or clause (e) shall be allowed if such interest has been actually paid and any interest which has been converted into a loan or borrowing shall not be deemed to have been actually paid.
- Explanation 3CA: Clarifies that conversion of unpaid interest into debentures or any other financial instrument by which liability to pay is deferred to a future date shall not be treated as actual payment.
- Explanation 3D & 3DA: Extends identical anti-avoidance restrictions to interest payable to cooperative banks and systemically important NBFCs.
Consequently, tax auditors must verify bank loan ledgers and loan sanction letters. If unpaid accrued interest is funded through a restructured credit line, it must be reported as unpaid in Clause 26 and disallowed under Section 43B until the converted loan is physically repaid in cash!
5. Real-World Practical Case Studies & Worked Numerical Illustrations
Case Study 1: Leave Encashment Provision vs. Actual Disbursement (Section 43B(f))
Scenario: Precision Auto Parts Ltd. engaged an actuarial consultant on March 31, 2026 to compute its leave encashment liability under Ind AS 19. Based on the actuarial report, the company debited ₹80,00,000 to its Profit and Loss Account as "Provision for Leave Encashment". During FY 2025-26, actual cash disbursements made to retiring and resigned employees totaled ₹15,00,000. Prior to filing its return under Section 139(1) on October 31, 2026, it paid an additional ₹10,00,000 to employees taking leaves in August 2026.
Audit & Clause 26 Treatment:
- Under Section 43B(f), deduction is allowable strictly on actual payment. The actuarial provision of ₹80,00,000 is inadmissible.
- Total actual payments made up to October 31, 2026 = ₹15,00,000 (paid during FY) + ₹10,00,000 (paid before Section 139(1) due date) = ₹25,00,000.
- Disallowance under Section 43B(f): ₹80,00,000 (accrued in P&L) - ₹25,00,000 (paid before due date) = ₹55,00,000.
- Clause 26 Reporting: In Clause 26(B), the auditor reports ₹55,00,000 as unpaid current-year liability, which is added back to compute total income in Schedule BP. When this ₹55,00,000 is subsequently disbursed in future years, it will be allowed under Clause 26(A).
Case Study 2: Delayed Employer vs Employee PF Contributions Post-Checkmate
Scenario: Zenith Garments Ltd. generated monthly payroll for August 2025: Employer PF Contribution: ₹5,00,000; Employee PF Contribution: ₹5,00,000 (Total ₹10,00,000). Due to liquidity constraints, Zenith deposited the ₹10,00,000 on September 22, 2025 (statutory labor due date was September 15, 2025; 7-day delay). Zenith filed its corporate income tax return on October 30, 2026.
Tax Treatment:
- Employee Contribution (₹5,00,000): Governed by Section 36(1)(va) read with the Supreme Court Checkmate ruling. Because the deposit occurred after September 15, 2025, the ₹5,00,000 is permanently disallowed and reported as deemed income under Clause 20(b) of Form 3CD. It can never be recovered!
- Employer Contribution (₹5,00,000): Governed by Section 43B(b). Because the employer's share was paid on September 22, 2025 (well before the Section 139(1) due date of October 31, 2026), it is fully allowable as a tax deduction! The auditor confirms zero disallowance under Clause 26.
Case Study 3: Bank Loan Interest Restructuring & Explanation 3C Disallowance
Scenario: InfraBuild Ltd. defaulted on term loan interest of ₹3,00,00,000 due to State Bank of India in FY 2025-26. In February 2026, SBI approved a One-Time Restructuring (OTR) under RBI guidelines, converting the ₹3,00,00,000 unpaid interest into a Funded Interest Term Loan (FITL) repayable over 5 years. InfraBuild credited the interest liability in its books, treating it as fully settled.
Clause 26 Audit Verification: Under Explanation 3C to Section 43B, conversion of unpaid interest into an FITL does NOT constitute actual payment. The tax auditor must disallow the entire ₹3,00,00,000 under Section 43B(e) and report it in Clause 26(B). Deductions will be permitted only in future financial years as and when InfraBuild pays cash installments towards the FITL principal.
Case Study 4: Accrued Bonus Declared but Paid Post-Section 139(1) Deadline
Scenario: RetailKing Ltd. provided for annual performance bonuses of ₹45,00,000 payable to managerial employees in its financial statements for FY 2025-26 on March 31, 2026. The statutory tax audit due date under Section 44AB was October 31, 2026. RetailKing disbursed ₹30,00,000 of the bonus on October 15, 2026. The remaining ₹15,00,000 was disbursed on Diwali (November 8, 2026).
Computation:
- Amount paid on or before October 31, 2026 = ₹30,00,000 (Allowable in FY 2025-26).
- Amount paid after October 31, 2026 = ₹15,00,000 (Disallowed in FY 2025-26 under Section 43B(c)).
- Reporting: The ₹15,00,000 is reported as disallowed in Clause 26(B) for AY 2026-27. In the subsequent audit for AY 2027-28, this ₹15,00,000 will be reported as paid in Clause 26(A), providing a valid deduction in FY 2026-27.
Case Study 5: Disputed Municipal Property Tax Paid Under Protest
Scenario: Metro Towers Ltd. received a disputed municipal property tax assessment of ₹50,00,000 from the Municipal Corporation in January 2026. Metro Towers challenged the valuation in the High Court but deposited ₹25,00,000 "under protest" on May 10, 2026, while the remaining ₹25,00,000 was stayed.
Tax Treatment: Under Section 43B(a), actual payment of taxes is allowable even if made "under protest" or pending litigation. The ₹25,00,000 deposited on May 10, 2026 (prior to the Section 139(1) deadline) is fully allowable in FY 2025-26. The remaining unpaid ₹25,00,000 is disallowed and reported in Clause 26(B).
Case Study 6: GST Liability Paid via DRC-03 Post-Audit Notice
Scenario: During statutory audit in September 2026, the tax auditor discovered an outward supply GST liability mismatch of ₹18,00,000 relating to FY 2025-26 that was never paid in Form GSTR-3B. The company immediately generated Form GST DRC-03 and deposited the ₹18,00,000 tax plus interest in cash on September 25, 2026.
Outcome: Because the payment was remitted via Form GST DRC-03 prior to the Section 139(1) deadline of October 31, 2026, the tax liability is allowable as a deduction under Section 43B(a) in FY 2025-26, provided it was debited to the Profit and Loss Account. The tax audit team validates the electronic cash ledger debit challan using assureTax.
Case Study 7: Unpaid Railway Siding Charges (Section 43B(g))
Scenario: CoalTrans Logistics Ltd. debited ₹60,00,000 towards railway siding lease rent and demurrage charges to the Ministry of Railways in FY 2025-26. As of October 31, 2026, it settled ₹40,00,000 through electronic bank transfers, while ₹20,00,000 remained pending reconciliation.
Clause 26 Action: The auditor reports ₹40,00,000 as paid and ₹20,00,000 as unpaid under Section 43B(g) in Clause 26(B). The ₹20,00,000 is added back to taxable income, preventing automated CPC adjustments under Section 143(1)(a).
6. Step-by-Step Audit & Compliance Verification Protocol
To eliminate audit errors and avoid disciplinary inquiries, statutory tax auditors should follow this 10-step protocol:
| Step No. | Audit Area | Verification Standard | Action in assureOffice Ecosystem |
|---|---|---|---|
| 1 | Trial Balance Ledger Audit | Scan all liability ledgers: statutory dues, taxes, duties, bonus, commission, PF/ESI, bank interest, leave encashment, and railway dues. | Extract liability masters automatically using assureFinancials. |
| 2 | Prior Year Clause 26(A) Reconciliation | Trace all pre-existing liabilities disallowed in the preceding year's Form 3CD to determine if they were discharged during the year. | Auto-populate opening disallowance balances in assureTax. |
| 3 | Challan & Bank Statement Matching | Inspect 100% of tax challans (GST, Customs, Municipal Tax) to verify clearance dates on or before the Section 139(1) deadline. | Match challan CIN/BRN dates with bank statements. |
| 4 | Employee PF/ESI Segregation | Segregate employee contributions from employer contributions; ensure employee contributions are audited under Clause 20(b) per Checkmate. | Run automated payroll compliance checks in assureTax. |
| 5 | Bank Interest Certificate Review | Examine annual bank interest certificates from Scheduled Banks and NBFCs to confirm interest was physically paid, not converted into loans. | Audit loan bank reconciliations and facility letters. |
| 6 | Explanations 3C to 3DA Audit | Review debt restructuring agreements, CDR/SDR/OTR sanction terms to identify funded interest term loans (FITL) and disallow. | Flag loan restructuring transactions automatically. |
| 7 | Actuarial Provision Carve-Out | Identify actuarial provisions for leave encashment; verify that only actual payments made to employees are treated as allowable. | Reconcile actuarial valuation reports with cash disbursements. |
| 8 | MSME Clause 22 / 43B(h) Isolation | Isolate micro and small enterprise payables; ensure they are audited under Clause 22 and excluded from Section 139(1) grace periods. | Run MSME vendor classification audit in assureFinancials. |
| 9 | Clause 26 Schedule Drafting | Draft sub-clauses 26(A) and 26(B) with precise dates, ledger heads, paid amounts, and unpaid balances. | Generate digital Form 3CD Clause 26 JSON and XML files. |
| 10 | Schedule BP Alignment | Verify that net Clause 26 additions and deductions reconcile perfectly with Schedule BP of Form ITR-6 / ITR-5. | Cross-validate tax return schedules using assureITR. |
7. Comprehensive Practitioner FAQ Bank (16 Detailed Technical FAQs)
Q1: What is the primary difference between Clause 26(A) and Clause 26(B) in Form 3CD?
Clause 26(A) reports pre-existing liabilities incurred in prior financial years that were disallowed in those years and assesses whether they were paid or remained unpaid in the current year. Clause 26(B) reports liabilities that accrued in the current financial year and determines whether they were paid on or before the Section 139(1) return filing due date.
Q2: Does the first proviso to Section 43B apply to employee contributions to Provident Fund (PF)?
No. Following the Supreme Court ruling in Checkmate Services, employee contributions to welfare funds are governed exclusively by Section 36(1)(va) read with Section 2(24)(x). They must be deposited on or before the statutory due date under the labor act (the 15th of the succeeding month) and are permanently disallowed if delayed. Section 43B applies only to employer matching contributions.
Q3: What happens if an assessee converts unpaid bank interest into an equity share or debenture?
Under Explanations 3C, 3CA, 3D, and 3DA to Section 43B, conversion of unpaid accrued interest into a loan, borrowing, debenture, or other financial instrument does NOT constitute actual payment. The interest remains statutorily disallowed under Section 43B until actual cash is remitted to the financial institution.
Q4: If an assessee makes a provision for leave encashment on an actuarial basis, can it be claimed under Section 43B?
No. Under Section 43B(f), deduction for leave encashment is allowable strictly on actual payment. Even though the Supreme Court in Bharat Earth Movers held that actuarial provisions are legitimate business liabilities under accrual accounting, Parliament subsequently inserted clause (f) in Section 43B to override that ruling. Actuarial provisions must be disallowed until disbursed.
Q5: Is GST payable on reverse charge (RCM) covered under Section 43B(a)?
Yes. Any tax, duty, cess, or fee payable under any law is covered by Section 43B(a). If an assessee incurs an RCM liability for the financial year, it must be paid on or before the Section 139(1) return filing deadline to be allowable as a business deduction in that year.
Q6: Does Section 43B apply to assessees who maintain books of account on a cash basis?
Section 43B operates as a restriction on deductions claimed under mercantile accounting. For an assessee maintaining cash-basis books, deductions are allowed only upon payment anyway, so Section 43B does not impose any additional disallowance, except that payments made after the year-end cannot be related back to the prior year.
Q7: Can bonus or commission paid to a director-shareholder be allowed under Section 43B(c)?
Section 43B(c) applies to bonus or commission payable to employees for services rendered. However, under Section 36(1)(ii), if the bonus or commission would have been payable to the individual as profits or dividend had it not been paid as bonus, it is disallowed under Section 36(1)(ii) itself, regardless of Section 43B.
Q8: If a statutory liability is paid on the exact date of filing the ITR, which is after the Section 139(1) deadline, can it be allowed?
No. The first proviso to Section 43B strictly requires that the payment must be made on or before the due date for furnishing the return of income under Section 139(1). If a return is filed belatedly under Section 139(4) and payment was made after the Section 139(1) due date, the deduction is disallowed in the current year and allowed only in the subsequent year of payment.
Q9: How does Section 43B(h) differ from the other clauses of Section 43B?
Section 43B(h) mandates payment to Micro and Small Enterprises within 15 or 45 days as prescribed under the MSMED Act. Crucially, the first proviso to Section 43B does NOT apply to Section 43B(h). Therefore, MSME dues unpaid within 45 days cannot be paid up to the Section 139(1) return filing deadline to preserve the deduction; they are strictly disallowed in the year of accrual.
Q10: Are interest payments to non-banking financial companies (NBFCs) covered under Section 43B?
Yes. Under Section 43B(da), any sum payable as interest on any loan or borrowing from a deposit-taking NBFC or a systemically important non-deposit-taking NBFC is covered by Section 43B and must be paid before the Section 139(1) deadline.
Q11: Can a taxpayer claim deduction under Section 43B if payment is made under protest?
Yes. The Supreme Court and various High Courts have held that actual payment of taxes or statutory dues satisfies Section 43B even if the payment is made "under protest" pending the outcome of appellate or writ proceedings.
Q12: If an employer deposits employee PF contributions within the grace period allowed by the labor department, is it allowed?
Following the Checkmate judgment, any deposit made within the statutory due date prescribed by the labor statute or official circulars extending such due date is allowable. However, informal or unnotified delays beyond the statutory due date are strictly disallowed.
Q13: Does Section 43B apply to customs duty paid on goods stored in a bonded warehouse?
Under the landmark Supreme Court decision in Berger Paints, customs duty paid on goods lying in a bonded warehouse or raw material inventory is allowable under Section 43B in the year of payment, irrespective of whether the goods have been cleared or consumed in production.
Q14: How should a tax auditor verify payments made via electronic payment gateways on the Section 139(1) due date?
The auditor must verify the electronic challan receipt date and the date on which funds were debited from the bank account. If the challan generation and bank debit occurred on or before the due date, it is accepted as paid, even if portal credit confirmation takes an extra day.
Q15: What is the consequence of failing to report a Section 43B default in Form 3CD Clause 26?
Failing to report an unpaid Section 43B liability in Clause 26 constitutes professional negligence by the tax auditor, attracting disciplinary proceedings under the Chartered Accountants Act, 1949. For the assessee, the Centralized Processing Centre (CPC) will add back the sum under Section 143(1)(a) with interest and penalty exposure under Section 270A.
Q16: How does the assureOffice suite streamline Clause 26 compliance?
The assureOffice suite integrates assureTax for automated challan matching and Section 43B disallowance scheduling, assureFinancials for multi-year liability tracking, and assureITR for seamless auto-population of Schedule BP.