VIA Taxation and Corporate Law Forum organized a Session on “Delayed Payment to MSME & Disallowance under Income Tax Act” on 9th February 2024 at VIA Auditorium, Nagpur. The introduction of new section 43B(h) in Income tax Act 1961 is creating a lot of confusion & anxiety amongst the industry & trade houses.
Renowned CA Naresh Jakhotia, Partner of SSRPN & Co. guided on impact of this new provision of introduction of time limit for payment within 15 or 45 days and Business Terms are likely to be revisited in accordance with Income Tax Act. Though the provision of timely payment is already there in the MSMED Act-2006, its repercussion is also incorporated in the Income Tax Act-1961.
Finance Act – 2023 has added a new clause (h) to section 43B so as to ensure that the payments to micro and small enterprises is done in accordance with the provisions of MSMED Act. Deduction towards purchases and expenses shall be available only if the payment to Micro/Small is actually made within the period agreed in writing between the buyer & seller. If there is no agreement in writing then the payment has to be done before the appointed date (i.e., 15 days). If the period agreed in writing is beyond 45 days, then the payment has to be done within 45 days only. He also highlighted that the agreed period or period of 15 days or 45 days shall be extended if there exists a dispute with written communication within 15 days with regard to product or services. In such a case, the period will be reckoned from the date of resolution of the disputes. He highlighted that the rule of 15 / 45 days is not applicable if the purchase is done from traders or medium enterprises or unregistered entities. Also, he elaborated about the non-applicability of the provision with regard to the opening balance as on 01.04.2023. The utility is also provided in the MSME portal to verify about the status of MSME, he informed the audience. With this strong reporting requirement and serious impact the industries should comply with this provision in true spirit.
The session covered the area like what if payment is not done within 15 / 45 days, who is not covered by the new law, Precaution to be taken before 31st March, what if there exists a dispute & litigation, what are the safeguards one should take.
Earlier, CA Ashok Chandak, Chairman – VIA Taxation & Corporate Law Forum welcomed the guest speaker and in his welcome address expressed his view that the object of the new provision is to ensure payment to MSME & it is laudable. With timely recovery of payment, MSME would get a real boon in the economy. CA. Anil Parakh, past VP in his opening remarks said that though the MSME Act was introduced in 2006, it was not that effective and with the provision in the Income Tax Act, it will serve the intended purpose.
CA Sachin Jajodia, Convener of the forum conducted the proceedings. Ashish Doshi, Hon. Secretary – VIA proposed a formal vote of thanks.
Prominently present representatives from Sanvijay, Gimatex Industries, C P Foundry Works, Elkem South Asia, Diffusion Engineers, Mecgale Pneumatic, Truform Techno Products, Basant Agro Tech India Ltd, Jayaswal Neco and Aerocom Cushions, Sandip Khemka, Plasto Industries Ltd, Nice Software Solutions Pvt. Ltd, CDET explosive industries, etc.