Micro, Small and Medium Enterprises Development Act - Interest not to be allowed as deduction from income

By Vijay Kumar

The Micro, Small and Medium Enterprises Development Act, 2006 (MSMEDA, 2006) which provides for facilitating the promotion and development and enhancing the competitiveness of micro, small and medium enterprises has come into force from 2nd October, 2006. Section 23 of MSMEDA, 2006 lays down that the amount of interest payable or paid by any buyer shall not be allowed as deduction in the computation of income. Section 22 requires disclosure of the principal and interest due thereon separately in the annual statement of accounts. This enables the assessing officers to ascertain correct amount of disallowance on account of interest payable or paid by the buyer.

Board wants the assessing officers to note these provisions.

INSTRUCTION NO. 12/2006, Dated: December 14, 2006