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March 2024

Section 43B(h) – The Provisions And Debatable Issues

By Chandrakant K Thakkar, Chartered Accountant
Reading Time 21 mins

BACKGROUND

Micro and Small enterprises’ role in developing a country like India is significant. It generates employment opportunities, and rural growth is mainly because of micro and small enterprises. Like all business entities, micro and small enterprises also have various problems. Central and State Governments have always given support and multiple incentives for the growth of micro and small enterprises. Shortage of working capital and effective utilisation of available working capital are two significant problems that micro and small enterprises face. To overcome such a situation, the Government and RBI have provided guidelines for cheap and sufficient working capital finance to micro and small enterprises. However, many micro and small enterprises suffer acute working capital shortages due to delayed payments by buyers of goods and services. Several representations were made to the State and Central Governments for bringing a law to make timely payments to Micro and Small Enterprises mandatory. The Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act) was enacted to give relief to such units. Provision was introduced in said Act for payment of interest on delayed payments, and such interest was not allowable as a deduction under the Income Tax Act. Further, statutory auditors of companies were asked to provide an ageing analysis o

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