« Top Headlines » Open DEMAT Account in 24 hrs  Old or new tax regime for TDS on salary? This post-election 2024 event will impact your tax planning  What Are 5 Heads Of Income Tax?  Income Tax Dept releases interim action plan for FY25 on tax collection, refund approvals   Income Tax Return: 5 lesser-known tax-saving tips from Section 80  Income Tax Return: 5 lesser-known tax-saving tips from Section 80  Why you need not rush to file your ITR immediately  Income tax returns: ITR-1, ITR-2, ITR-4 forms for FY 2023-24 available for e-filing  Section 80DDB tax benefits for specified illnesses: 5 things to know  Income tax slabs FY 2024-25: Five tips to help taxpayers decide between old and new income tax regimes  ITR-1, ITR-2, ITR-4 forms for FY 2023-24 (AY 2024-25) available now on e-filing income tax portal  How To Save Tax For Salary Above 15 Lakhs? «  BPO says 'No' to pay hikes to juniors... Rejection of tax returns without enclosures?... » HC makes leave encashment less taxing July, 12th 2007 Companies providing for leave encashment payments in their books can now claim tax deduction even if the actual cash payouts have not taken place. Providing for leave encashments is mandatory under ICAI accounting norms for companies. However, companies were unable to claim a deduction for the encashments if there was no actual cash outflow due to a provision in the Income-Tax Act. The government had carried out an amendment in Section 43B(F) of the Income-Tax Act in 2001. As per the amendment, companies could claim deduction only for actual cash flow and not for the provisions made. According to a recent ruling by the Calcutta High Court, companies will be able to claim deduction based on provision for leave encashment. The decision came in response to a petition filed by Exide Industries. The court has termed the amendment carried out by government as arbitrary and struck it out. What the high court has held is for other items covered under Section 43B like statutory duties, payments to excise department, contribution to provident funds and interest payments to banks. Giving deduc- tion only on account of actual cash outflow was appropriate as public money was involved in the payments and the government wanted to stop misuse of public money. However, leave encashment is not a statutory liability and does not involve public money. The decision will help companies as they would be able to claim deduction for the payouts and would reflect on their balance-sheet, PricewaterhouseCoopers executive director Rahul Mitra said. The amendment was brought in by the government to nullify a Supreme Court verdict given in the case of Bharat Earth Movers. The high court pointed the original Section 43B did have the sub-section F covering leave encashments. Section 43B was brought in only to prevent evasion of statutory liability and sub-section F was inserted in 2001 only to nullify the apex courts decision.