Introduction: The integration of Section 43B(h) into the Income Tax Act has been a pivotal move by the Government to bolster the Micro, Small, and Medium Enterprises (MSMEs). This section emphasizes timely payments, particularly to micro and small enterprises. This article delves into the relevance of Udyam Registration verification and its connection with the provisions of Section 43B(h).
In order to provide liquidity to the Micro, Small and Medium Enterprises, and to promote its timely payments Government is constantly making endeavors in this area and one such effort made by Government was the Introduction and Inclusion of Section 43B(h) via a significant amendment to Finance Bill 2003.
The Section is reiterated below: –
43B(h): – Any sum payable by the assessee to a micro or small enterprises, beyond the time limit specified in section 15 of the Micro, small and Medium Enterprises Development Act 2006. shall be allowed as deduction only on actual payment.
Provided that nothing contained in this section [except the provisions of clause(h)] shall apply in relation to any sum which is actually paid by the assessee on or before the due date applicable in his case for furnishing the return of income under sub-section (1) of section 139 in respect of the previous year in which the liability to pay such sum was incurred as aforesaid and the evidence of such payment is furnished by the assessee along with such return.
Explanation to the Section: –
As per Section 15 of the MSMED Act, 2006, The payment shall be made as per the following terms:
- In the existence of the Agreement: – The payment shall be as per the terms of the agreement but not exceeding 45 days of the Invoice date.
- In the absence of the Agreement: – The payment shall be made within 15 days of the Invoice date.
However, if the payment is not made in compliance with section 15 of the MSMED Act, assessee shall be liable to pay Interest at the rate of three times the Bank Rate Notified by the RBI.
Hence, if the assessee makes payment to any party or supplier or person registered under MSMED Act 2006, beyond the time limit specified in section 15 of the MSMED Act, then such payment shall be allowed on actual payment basis.
Also, if assessee fails to comply with provisions of Sections 15 of the MSMED Act, 2006, he shall be liable to pay Interest as per the provisions of Section 16 of the MSMED Act, 2006 and since such Interest is penal in nature as referred in section 23 of the MSMED Act which has an overriding effect, in such cases the Interest shall not be allowed as deduction while computing income under the Income Tax Act.
Section 23 of MSMED Act provides, notwithstanding anything contained in the Income tax Act, 1961 (43 of 1961), the amount of interest payable or paid by any buyer, under or in accordance with the provisions of this Act, shall not, for the purposes of computation of income under the Income Tax Act, 1961, be allowed as deduction.
Further to the above,
In order to ensure more stringent compliance the MSMED Act and to enhance the liquidity to the MSME Entities, MSME portal has launched the new functionality called “Verify Udyam Registration Number”
It is the newest and simpler functionality introduced by the MSME Portal. It is very important and helpful to the introduction of new Section 43B(h) to the Income Tax Act because it user friendly and will help in verifying the authenticity of Entities registered under MSMED Act, 2006.
This will also enable the Government to assess compliances with Provisions of MSMED Act, 2006.
The link to access the feature is as below: –
https://udyamregistration.gov.in/Udyam_Verify.aspx
Conclusion: Verifying Udyam Registration Numbers through the new portal feature is a crucial step in upholding the spirit of Section 43B(h). This streamlined process not only supports timely payments but also aids the government in assessing MSMED Act compliance. The feature is a valuable addition, fostering a conducive environment for MSMEs to thrive and contribute to the economic landscape. To explore this functionality and ensure compliance, visit Udyam Registration Verification.
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Details of the Author: – CA. Chirag Dayani | Associate in Practice | Proprietor of Chirag Dayani & Chartered Accountants, Kota, Rajasthan | Email:- dayanichirag9@gmail.com | Contact Number: – (+91)-8320125295
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