Is it permissible to accept financial compensation for a period of leave taken by a colleague, during which no actual tasks were performed that would warrant such payment, and what should be done if insistence is made upon payment?

If the general administration of the institution allows you to act on behalf of your absent colleague and receive a salary for it, there is no harm in it. Likewise, if your colleague chooses you to perform his task and the institution agrees to it, there is no harm in you acting on his behalf and taking financial compensation for your work.