« Top Headlines » Open DEMAT Account in 24 hrs  Delhi HC Rules GST Registration Cannot Be Cancelled Retrospectively Without a Clear Show Cause Notice (SCN)  Belated income tax return AY 2026-27: How to file, late filing charges and what you may lose  Major Financial Changes from August 1, 2026: ITR Deadline, RBI MPC Meeting, Tatkal Ticket Rules & More  Government proposes to ease tax relief conditions for offshore funds  TallyPrime Connected Banking: Automating Banking and Accounting  ITR Filing Deadline 2026: Is July 31 the Last Date to File Your Income Tax Return? Latest Official Update  ITR filing deadline nears: How to file income tax return online on e-filing portal - quick 15-step guide  Will the ITR Filing Deadline Be Extended Beyond July 31 for FY 2025-26? Here's the Latest Update for Taxpayers  Income Tax Refund Delayed for AY 2026-27? 5 Common Reasons Your Refund May Be Stuck and How to Fix It  ITR Filing 2026: FM Nirmala Sitharaman Asks Tax Officials to Let Honest Taxpayers Correct Genuine Mistakes  Will Your FCNR Deposit Stay Tax-Free After Returning to India? Tax Rules Explained for NRIs «  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.