“actual payment basis”
The decision most relied on for actual payment basis is CIT v. AIMIL Ltd. (321 ITR 508), cited in 1,629 judgments on BharatTax.
Leading authorities on actual payment basis
Employee contributions to PF and ESIC, deposited beyond the due date under the respective Acts but within the due date for filing the income tax return under Section 139(1), are allowable deductions under Section 36(1)(va). Such disallowance cannot be made during processing under Section 143(1).
When following the mercantile system of accounting, provisions for liabilities made on a scientific and rational basis are allowable as deductions, even if their actual quantification and discharge are deferred to a future date.
No disallowance can be made under Section 36(1)(va) or Section 43B for delayed payment of employee's contributions to ESI or PF if these amounts are deposited by the assessee on or before the due date for filing the return of income under Section 139(1). This aligns the treatment of employee contributions with employer contributions for allowability.
Section 43B of the Income-tax Act applies to both employer and employee contributions to welfare funds, allowing deductions for these contributions only upon actual payment.
The provision for leave encashment is allowable as a deduction only on an actual payment basis under Section 43B(f) of the Income Tax Act, 1961. The Supreme Court upheld the constitutional validity of Section 43B(f).
The Punjab & Haryana High Court held that employees' contributions to provident fund (PF) and Employees' State Insurance (ESI), deposited after the due date under the respective special Acts but before the due date for filing the income tax return, are allowable as a deduction under Section 36(1)(va) read with Section 43B of the Income-tax Act.
Additions to income cannot be made solely on the basis of loose papers or notings found during a search in the premises of a third party, especially when there is no corroborative evidence to suggest that the assessee actually received the amounts or made payments.
An addition to income cannot be made on the basis of deeming fiction without evidence that the assessee actually paid more than what was declared in the registered deed. The Assessing Officer bears the burden of proving the assessee's liability to tax.
