M/s ABC Construction v. DCIT - Section 43B MSME payment disallowance

The ITAT Chennai Bench addressed the amendment to Section 43B introduced by Finance Act 2023 requiring payments to MSME suppliers to be made within the time period prescribed under the MSMED Act 2006 (45 days or as per agreement, maximum 45 days) for the expense to be deductible in the current year. Held that amounts payable to MSME suppliers not paid within the prescribed period are to be disallowed in the year of expense and allowed in the year of actual payment. The Tribunal clarified that this provision applies from AY 2024-25, and the assessee should maintain Udyam registration certificates of all MSME suppliers to determine applicability.

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