Is mere provision of leave salary deductible?
T. C. A. Ramanujam There is always a presumption in favour of the constitutionality of a statute. In respect of fiscal statutes, seldom do High Court declare an amendment as unconstitutional and beyond the competence of the legislature. But one such situation has arisen with regard to deduction of leave salary. The Finance Act, 1983 introduced Section 43B in the Income-Tax Act, 1961 with effect from April 1, 1984, for preventing companies from getting deduction for unpaid statutory liability without discharging the same. Under the mercantile system of accounting, income and outgo are accounted for on the basis of accrual and not on the basis of actual disbursements or receipts. Companies were found claiming deduction for statutory liabilities such as excise duty and contribution to provident funds and State insurance schemes even while disputing the claims for payment before authorities concerned. They were thus getting double benefit. Deduction on the basis of mercantile system of acc
