In Brief
The Supreme Court upheld the constitutional validity of clause (f) of Section 43B of the Income Tax Act, 1961, which restricts deductions for leave encashment liabilities to the year of actual payment, regardless of the accounting method used. The Court rejected the High Court's decision that the clause violated Article 14 and was unconstitutional. Applying principles of constitutional review, the Court held that legislative competence exists, no fundamental rights are infringed, and the absence of stated objects and reasons does not invalidate an unambiguous statutory provision. The Court emphasized that the legislature has wider discretion in fiscal matters and can prospectively regulate deductions to remedy mischiefs like employers claiming advance deductions while deferring payment. The clause serves legitimate public revenue and employee welfare objectives.
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