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Income Tax--Recent Developments

Taxation of Non-Banking Financial Companies--Recent Developments

CA. Manoj Gupta

The Finance (No.2) Act, 2019 has carried out certain important amendments in provisions relating to taxation of NBFCs. The leaned author explains these amendments with apt illustrations.

A. INTEREST PAYABLE TO CERTAIN
NON-BANKING FINANCIAL COMPANIES ALLOWABLE ONLY ON PAYMENT BASIS

1. Provisions of Section 43B

 Section 43B overrides all other provisions of the Act and provides a deduction otherwise allowable under the Act in respect of -

(a) any sum payable by the assessee by way of tax, duty, cess or fee, by whatever name called, under any law for the time being in force, or

(b) any sum payable by the assessee as an employer by way of contribution to any provident fund or superannuation fund or gratuity fund or any other fund for the welfare of employees, or

(c) any sum referred to in Section 36(1)(ii) [Being any sum paid to an employee as bonus or Commission for services rendered, where such sum would not have been payable to him as profits or dividend if it had not paid as bonus or Commission]; or

(d) any sum payable by the assessee as interest on any loan or borrowing from any public financial institution, or a state financial corporation or a state industrial investment corporation, in accordance with the terms and conditions of the agreement governing such loan or borrowing; or

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