Skip to content

CMA Final · Corporate and Economic Laws · Specific Legal Provisions related to MSME Sector

A buyer pays interest to a micro enterprise supplier under the provisions of the MSMED Act, 2006 for delayed payment. How is this interest treated in computing the buyer's income under the Income-tax Act, 1961, as stated in the MSMED Act?

The interest is not allowed as a deduction. Section 23 states that, notwithstanding the Income-tax Act, 1961, interest payable or paid by a buyer under the MSMED Act cannot be deducted when computing income, regardless of when or by whom it is paid.

  1. AAllowed as deduction only if paid within the financial year
  2. BAllowed as deduction up to fifty per cent of the amount
  3. CNot allowed as deduction from incomeCorrect
  4. DAllowed as deduction only for public sector buyers

Explanation

Section 23 provides that, notwithstanding anything in the Income-tax Act, 1961, interest payable or paid by a buyer under the Act shall not be allowed as deduction in computing income. No partial or conditional allowance is provided, so the other options are wrong.

Did you get it right without looking?

One question tells you little. A timed set on Specific Legal Provisions related to MSME Sector shows your real accuracy, how long you take and where you lose marks.

Practise Specific Legal Provisions related to MSME SectorFree diagnostic mock

More Specific Legal Provisions related to MSME Sector questions