Article
Timely payments to MSMEs – A beneficial amendment with a delayed clarity in Income Tax provisions
By Karanjot Singh Khurana, Devashish Jain and Kanika Jain
The article in this issue of Direct Tax Amicus discusses Section 43B(h) of the Income Tax Act, 1961 which was introduced by Finance Act, 2023. Observing that despite the well-placed intent behind introducing the aforesaid provision, the cross-linkage of the Income Tax Act with the MSME Act may cause certain ambiguities specifically concerning the deduction of the provision of expenses, calculating the time limit under the MSME Act, etc. The article highlights, along with illustrations, a number of these ambiguities and associated practical hardships that a businessman would face going forward. According to the authors, clarity is required in these provisions with respect to, inter alia, composite contracts, continuing services, etc. Otherwise, ambiguity surrounding such stringent provisions may make buyers wary of dealing with MSMEs, which is counterproductive to the intention of these provisions.
Notifications & Circulars
- Digitalization of income-tax forms – Six specified forms to be furnished electronically
Ratio decidendi
- Transfer of capital asset – Deeming provision of Section 50C does not apply to leasehold rights – ITAT New Delhi
- Connectivity charges ancillary to interconnect charges are not to be treated as Fee for Technical Services – ITAT New Delhi
- Belated TDS deposit – Delay in reimbursement by the State Govt is a reasonable cause for quashing prosecution – Andhra Pradesh High Court
- No disallowance under Section 40(a)(i) to be made if the recipient has declared the respective income in their return of income – ITAT Chennai
- Receipt of money on settlement of dispute related to operation of hotel under a licensing arrangement is a ‘business receipt’ – Calcutta High Court
- Payments made for obtaining administrative services does not constitute ‘fees for included services’ under the India-USA DTAA – ITAT Bengaluru
