AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2021 (8) TMI 26
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....cts and in law by deleting disallowance of Rs. 43,14,198/- on account of late deposition of employees contribution to P.F, ignoring the CBDT circular No. 22/2015 which clearly provides that the deduction relating to employees contribution to welfare funds are governed by the sec. 36(1)(va) of the I.T Act." 2. Briefly stated the facts necessary for adjudication of the controversy at hand are : Assessee company is into the business of broadcasting, telecasting, relaying, transmitting or distributing audio, video or other programmes of software for television, radio and other media. During scrutiny proceedings, Assessing Officer (AO) noticed that the assessee has made huge investments of Rs. 45.67 crores of equity shares in subsidiary and associate company and claimed exempt income of Rs. 2,34,585/-. AO by invoking the provisions contained under section 14A of the Income-tax Act, 1961 (for short 'the Act') read with Rule 8D of the Income-tax Rules, 1962 proceeded to compute disallowance to the tune of Rs. 38,94,755/-. 3. AO also made addition of Rs. 3,34,81,847/- by way of disallowance of consumption incentive on the ground that these expenses are in the nature of provision, liabili....
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....tion before invoking the provisions contained u/s 14A of the Act and also relied upon the decisions of Courts including the Hon'ble jurisdictional High Court in cases of:- (i) Maxopp Investment Ltd. vs. CIT (AY 2002-03) ITA No.687/2009 (Del); (ii) Cheminvest Ltd. vs. CIT (AY 2004-05) (2015) 61 taxmann.com 118 (Del.); (iii) CIT-IV vs. Holcim India Pvt. Ltd. - ITA No.486/2014 and 299/2014 (Del.); (iv) CIT vs. Taikisha Engineering India Ltd. ITA 115/2014 & 119/2014 dated 25.11.2014 (Del.); (v) DCM Ltd. vs. DCIT, Circle 10(1), New Delhi and Vice- Versa - 2015 (9) TMI 1110 (ITAT Delhi); (vi) Joint Investments Pvt. Ltd. vs. CIT 372 ITR 694 (Del.); (vii) CIT vs. Hero Cycles Ltd. (2010) 189 taxmann 50 (Punj & Har.); and (viii) M/s. ACB India Ltd. vs. ACIT ITA No.615/2014 dated 24.03.2015 (Del.) 9. Bare perusal of the facts on record shows that as against earned exempt income of Rs. 2,34,585/- during the year under assessment, assessee company has suo motu made disallowance of Rs. 29,04,491/-. It is settled principle of law that in any case, disallowance u/s 14A cannot be more than the exempt income as has been held by Hon'ble Delhi High Court in case of Joint Investment Pr....
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....pting a specific method of determining such expenditure has been introduced by virtue of .sub-section (2) of section 14A . Prior to that, the assessee was free to adopt any reasonable and acceptable method. So, even for the pre-rule 80 period, whenever the issue of section 14A arises before an Assessing Officer, he has, first of all, to ascertain the correctness of the claim of the assessee in respect of the expenditure incurred in relation to income which does not form part of the total income under the Act. Even where the assessee claims that no expenditure has been incurred in' relation to income which does not form part of the total income, the Assessing Officer will have to verify the correctness of such claim. In case, the Assessing Officer is satisfied with the claim of the assessee with regard to the expenditure or no expenditure, as the case may be, the Assessing Officer is to accept the claim of the assessee in so far as the quantum of disallowance under section 14A is concerned. In such eventuality, the Assessing Officer cannot embark upon a determination of the amount of expenditure for the purposes of section 14A(1). In case, the Assessing Officer is not, on the ....
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...., yet it cannot be said that the liability in respect of the claim has accrued during the year. From the details given it is clear that these discounts are in the nature of provisions only and may or may not be passed on to the parties. Had it been an ascertained liability the same would have been credited to the party account and would not have been kept in a separate account. The right accounting entry for passing the account would have been as follows:- "Discount account Dr. To Party Account Cr. The discount in this can be said to be have been passed on to the customers. However, the assessee has made the following entry in its books of accounts :- Discount account Dr To Provision for Consumption Debtor Cr Thus it is clear that the expenses in the nature of provision, liability for which may or may not accrue in the time to come. That is why the claim of expenses has not been passed on to the parties and have been kept in a separate account titled 'consumption debtors'. Therefore the claim for the same, cannot be allowed as an expense and as such Provision for consumption Debtors amounting to Rs. 3,34,81,847/- is being disallowed ..." From the above ext....
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.... carefully considered the rival contention and found that the claim of the assessee is that company has given discount to its debtors based on consumption of Airtime during the current year. It filed its detail of the credit balance of the debt. From the details of credit balance of debtors, the learned assessing officer enquired about the details of the consumption debtor of Rs. 34,000,000/- which was explained by the assessee, that this is a discount account which is credited by the company by passing an accounting entry by crediting one control account having details of all the parties separately. As the assessee is in the business of the media the main source of income of the assessee company is broadcasting of advertisement in its channel. The assessee company sale space in its channels to advertiser usually a unit of sale of space is 10 seconds. The assessee company gave various schemes to its advertiser like consumption incentive, series discount etc. In case of consumption incentive, the advertisers are given an offer that in case if it consumes particular amount of time during the given period for broadcasting and advertising then it will be entitled to the consumption inc....
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....from its employees and credited to the employee's account in the relevant fund or funds on or before the due date. As per the explanation under the sub clause, 'due date' means 'the date by which the assessee is required as an employer to credit an employee's contribution to the employee's account in the relevant fund under any Act, rule, order or notification issued there under or under any standing order, award, contract or service or otherwise'. However, Section 43B of the Act, which begins with a non-obstante clause allows deduction under subsection (b) only on actual payment. The first proviso u/s 43B states "Provided that nothing contained in this section shall apply in relation to any sum which is actually paid by the assessee on or before the due date applicable in his case for furnishing the return of income under sub-section (1) of section 139 in respect of the previous year in which the liability to pay such sum was incurred as aforesaid and the evidence of such payment is furnished by the assessee along with such return". The argument against the disallowance u/s 36(1)(va) adduced by the AR of the appellant appears plausible if the law regarding its allowability....