Income Tax Appellate Tribunal - Delhi
Addl. Cit, Special Range- 9, New Delhi vs Tv Today Network Ltd., New Delhi on 29 July, 2021
IN THE INCOME TAX APPELLATE TRIBUNAL
(DELHI BENCH 'G' : NEW DELHI)
BEFORE SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER
and
SHRI KULDIP SINGH, JUDICIAL MEMBER
(THROUGH VIDEO CONFERENCE)
ITA No.5204/Del./2017
(Assessment Year : 2012-13)
Addl.CIT, Special Range 9, vs. M/s. TV Today Network Ltd.,
New Delhi. F - 26, Connaught Circus,
New Delhi - 110 001.
(PAN : AABCT0424B)
(APPELLANT) (RESPONDENT)
ASSESSEE BY : Shri Madhur Aggarwal, Advocate
REVENUE BY : Shri Prakash Dubey, Senior DR
Date of Hearing : 14,07.2021
Date of Order : 29.07.2021
ORDER
PER KULDIP SINGH, JUDICIAL MEMBER :
Appellant, Addl.CIT, Special Range 9, New Delhi (hereinafter referred to as 'the Revenue') by filing the present appeal sought to set aside the impugned order dated 08.02.2017 passed by the Commissioner of Income-tax (Appeals)-39, New Delhi qua the assessment year 2012-13 on the grounds inter alia that :-
"(1) The Ld. CIT (A) has erred on the facts and circumstances of the case, the Ld. CIT (A) has erred in no~ appreciating the fact that AO made the disallowance in accordance with sec. 14A r.w.r 8D of the IT Act only.2 ITA No.5204/Del./2017
(2) The Ld. CIT (A) has erred on the facts and circumstances of the case by deleting the addition made by the AO on account of consumption incentives on the ground that it is ascertained liability.
(3) That the Ld.CIT(A) has erred on facts 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, liability for which may or may not accrue in the time to come.
3 ITA No.5204/Del./2017
4. AO also made disallowance of Rs.43,14,198/- on account of late deposit of employees contribution of Provident Fund (PF) u/s 36(1)(va) Explanation 2 and assessed the total income of the assessee at Rs.30,99,68,141/-.
5. Assessee carried the matter before the ld. CIT (A) by way of filing appeal who has partly allowed the same. Feeling aggrieved, the Revenue has come up before the Tribunal by way of filing the present appeal.
6. We have heard the ld. Authorized Representatives of the parties to the appeal, gone through the documents relied upon and orders passed by the revenue authorities below in the light of the facts and circumstances of the case.
GROUND NO.1
7. Undisputedly, assessee company has made investment of Rs.45.67 crores in equity shares of its subsidiary and associate company during the year under assessment. It is also not in dispute that during the year under assessment, assessee has made suo motu disallowance of Rs.29,04,491/- u/s 14A of the Act. It is also not in dispute that during the year under assessment, assessee has earned exempt income to the tune of Rs.2,34,585/-. AO by invoking the provisions contained u/s 14A read with Rule 8D computed the disallowance as under :-
4 ITA No.5204/Del./2017
Computation of 14A Disallowance Directly attributed Expenses - Amount in Rs. NIL Total Direct Expenses NIL
(i) Interest Expenses A. Interest expenses which cannot be 1,43,38,751 directly attributed B. Average Value of Investment 46,56,96,411 related to tax free income Opening 47,46,80,340 Investment Closing 45,67,12,482 Investment C. Average Total Assets in BS 4,26,33,07,879 Opening Total 4,03,71,27,486 Assets Closing Total 4,48,94,88,272 Assets
(ii) Deemed interest expenses = A*B/C 15,66,272
(iii) 0.5% of Rs.46,56,96,411/- Average Investment 23,28,482 Total 14A Disallowance 38,94,755 Less : Disallowance made by the assessee 29,04,491 Disallowance to be made 9,90,264
8. Ld. CIT (A) deleted the addition on the ground that the AO has failed to record his satisfaction 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.); 5 ITA No.5204/Del./2017
(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 Private Ltd. vs. CIT (2015) 372 ITR 694 (Del.).
10. While deciding the identical issue, Hon'ble Delhi High Court in CIT vs. Taikisha Engg. India Ltd. - (2015) 370 ITR 338 has held as under :-
"Thus, s. 14A(2) of the Act and r. 8D(1) in unison and affirmatively record that the computation or disallowance made by the assessee or claim that no expenditure was incurred to earn exempt income must be examined with reference to the accounts, and only and when the explanation/claim of the assessee is not satisfactory, computation under sub-r. (2) of r. 80 of the Rules is to be made.
13. We need not, therefore, go on to sub-r. (2) of r. 8D of the Rules unit and unless the AO has first recorded the satisfaction, which is mandated by sub-s. (2) of s. 14A of the Act and sub-r.
(1) of r. 8D of the Rules."
11. Furthermore, AO except for making general observation that, "it cannot be ruled out that some expenditure would definitely be incurred towards such investments and keeping in view the huge 6 ITA No.5204/Del./2017 investments of Rs.45.67 crores out of total assets of assessee at Rs.448.94 crores, it can be safely concluded that buying and selling of securities as well as maintaining a portfolio of large number of scrips leading to or capable of generating the dividend income is one of the main activities of the assessee", has not recorded his satisfaction as to how and under what circumstances disallowance has been made by the assessee company of Rs.29,04,491/- is incorrect u/s 14A of the Act. AO has also not disputed books of account on the basis of which assessee has come up with the plea that he has incurred the expenditure only to the tune of Rs.29,04,491/- of which it has made suo motu disallowance. So, in the absence of satisfaction recorded by the AO, mechanical invoking of provisions contained u/s 14A read with Rule 8D is not permissible as has been held by Hon'ble Delhi High Court in case of Maxopp Investment Ltd. vs. CIT (2012) 347 ITR 272 (Del.), the operative part of which is extracted as under:-
"Section 14A even prior to the introduction of sub-sections (2) and (3) would require the Assessing Officer to first reject the claim of the assessee with regard to the extent of such expenditure and such rejection must be for disclosed cogent reasons. It is then that the question of determination of such expenditure by the Assessing Officer would arise. The requirement of adopting 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 7 ITA No.5204/Del./2017 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 basis of the objective criteria and after giving the assessee a reasonable opportunity, satisfied with the correctness of the claim of the assessee, he shall have to reject the claim and state the reasons for doing so. Having done so, the Assessing Officer will have to determine the amount of expenditure incurred in relation to income which does not form part of the total income under the Act. He is required to do so on the basis of a reasonable and acceptable method of apportionment."
12. In view of what has been discussed above, we are of the considered view that ld. CIT (A) has rightly deleted the addition made by the AO u/s 14A of the Act. So, ground no.1 is determined against the Revenue.
GROUND NO.2
13. AO made disallowance of Rs.3,34,81,847/- claimed by the assessee company on account of consumption incentive on the ground that these expenses are in the nature or provision, liability for which may or may not accrue in the time to come. However, ld. CIT (A) deleted this addition which is under challenge before the Tribunal.
8 ITA No.5204/Del./2017
14. Ld. DR for the Revenue challenging the impugned order drew our attention towards para 5.2 of the impugned order wherein self contradictory findings are recorded by the ld. CIT (A).
15. We have perused the order passed by the ld. CIT (A) who has deleted the addition by following his own order for AYs 2008-09, 2009-10 & 2010-11, which has been confirmed by the Tribunal, by returning following findings :-
"5.2 As regards the grounds at (IIIa), (IIIb) and (IIIc) relating to disallowance under the head 'consumption debtors', it is mentioned in the impugned order inter alia, ... The claim of consumption debtors is in the nature of discount to the advertisers to be allowed to them when they book additional time space on the channel of the assessee in the year to come. Thus the liability in respect of the claim would crystallized on the happening of future events i.e. booking of additional time space by the advertisers, which may or may not happen. The liability is clearly of contingent nature and cannot be called 'ascertained liability'. The legal position is settled that a liability can be termed as 'ascertained' only when it can be quantified with reasonable estimate and the liability in respect of the same has accrued during the year. While the quantification of liability may be correct in this case, 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 9 ITA No.5204/Del./2017 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 extract, it is observed that the main reason for such disallowance appears that the liability has been held not to be ascertained as per the books of accounts of the appellant where apparently, there appears to be entries which lead to the conclusion that the liability is yet to be ascertained. However, it can be safely concluded that quantification of a liability is the next logical step after ascertaining the liability per se. If the liability is not ascertained, quantification thereof can be difficult. But it is observed from the above portion of the impugned order that on one hand, it is mentioned that the quantification of liability in the present case is correct but the liability for the claim of expense has not accrued in the relevant FY - this is certainly, contradictory.
During the appeal hearing the AR of the appellant reiterated its submission that the individual party accounts in respect of discounts given were submitted at the assessment stage. Further, he relied on the appellate orders of the first appellate authority in the appellant's own case for AY 2008-09 and 2010-11 and filed copies thereof. In the appellate order for AY 2010-11, it is observed that the CIT (A) has held that this claim of expenses as an ascertained liability and allowed it. Similar is the case with order of CIT (A) in AY 2008-09 whereby a similar addition has been deleted. The situation appears similar in the present case as gathered from the aforementioned appellate orders. The appellant's contention is not only borne out from records but is also plausible that the liability was clearly an ascertained one allowable as per the mercantile system of accounting followed consistently. I am therefore in agreement with the view taken by the CIT(A) in the appellant's own case for AY 2008-09, 2009-10 and 2010-11 on this issue and accordingly delete the disallowance made in the impugned order (Rs.3,34,81,847/- ) on this point. This ground off appeal is allowed."
10 ITA No.5204/Del./2017
16. Ld. AR for the assessee further contended that aforesaid finding returned by the ld. CIT (A) in assessee's own case for Assessment Years 2008-09 & 2009-10 have been confirmed by the Tribunal in ITA Nos.6080/Del/2012 & 4097/Del/2013 vide order dated 28.03.2019. We have perused the order passed by the Tribunal which is on the identical facts and operative part of which is extracted as under :-
"30. We have 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 incentive. During the year, assessee has passed on this consumption incentive of Rs.34059992/-. Learned CIT(A) has held that this is the expenditure in the nature of incentive to the advertiser and the assessee has also shown income against this expenditure. Before the learned CIT - A the assessee demonstrated by producing the copies of the deals of some of the parties and shown that it is not an asset or liability but actual expenditure. In view of this, he held that assessee is eligible for deduction of the above expenditure. The learned departmental representative could not point out any infirmity in the order of the learned CIT(A). Therefore, we confirm the order of the learned CIT(A) and dismiss ground number 4 of the appeal of the AO."11 ITA No.5204/Del./2017
17. Keeping in view the facts and circumstances of the case and following the order passed by the coordinate Bench of the Tribunal in the assessee's own case for AYs 2008-09 & 2009-10, we are of the considered view that when the assessee has been consistently following mercantile system of accounting, the liability brought on record is an ascertained liability and the party-wise detail has been brought on record by the assessee and perused by the AO as well as ld. CIT (A) qua the discount given. So, we find no illegality or perversity in the findings returned by the ld. CIT (A), hence ground no.2 is determined against the Revenue.
GROUND NO.3
18. AO made a disallowance of Rs.43,14,198/- under Explanation 2 of section 36(1)(va) of the Act on the ground that employees contribution of Rs.40,55,290/- (TV Division) plus Rs.2,58,908/- (Radio Division) for the month of March, 2012 was deposited on 25.04.2012 as against the due date of 20.04.2012. Ld. CIT (A) deleted the addition by returning following findings :-
" The reason for the disallowance appears to be no modification of the 'due date' with respect to the employees' contribution u/s 36(1)(va) as it is with respect to that for the employer's contribution to PF u/s 43B of the Act. During the appellate stage, the AR of the appellant argued on the lines of the written submissions filed by the appellant relying on court decisions including that of the Apex Court in this connection. The appellant's contention rests on reading Section 43B in conjunction with Section 36(1)(va) of the Act. While Section 12 ITA No.5204/Del./2017 36(1)(va) allows deduction towards any sum received by the assessee 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 sub- section (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 is taken into account on a harmonious reading of both the date aforementioned sections of the Act along with the explanation as well as the proviso there under. The 'due date', being the bone of contention is, in my opinion, the date of filling of the return of the income u/s 139(1) of the Act. This is in due deference to the judicial pronouncement in the case of CIT vs. Aimil Ltd [(2010) 321 ITR 508 (Delhi) wherein the jurisdictional High Court has allowed the appeal on this point relying on the principles laid down by the Apex Court in Commissioner of Income Tax vs. Alom Extrusions Limited (2009) 319 ITR 306 (SC) as well as in CIT vs. Vinay Cement Ltd. 213 ITR 268 (SC) where the Hon'ble Supreme Court has dismissed the SLP of the Revenue on this point. Accordingly, the disallowance on this point (Rs.43,14,198/-) is deleted and the ground of appeal is allowed.
19. Ld. AR for the assessee supporting the order passed by the ld. CIT (A) contended that both the provisions contained u/s 36(1)(va) and section 43B are to be read conjointly. Ld. CIT (A) deleted the addition in the light of the conjoint reading of section 36(1)(va) and section 43B and by following the law laid down by 13 ITA No.5204/Del./2017 Hon'ble jurisdictional High Court in the case of CIT vs. Aimil Ltd. (2010) 321 ITR 508 (Delhi).
20. So, when the assessee has undisputedly paid the employees contribution of PF before filing the return of income, ld. CIT (A) has rightly deleted the disallowance made by the AO.
21. Hon'ble Delhi High Court in case of CIT vs. Aimil Ltd. (2010) 321 ITR 508 (Delhi) decided identical issue in favour of the assessee by relying upon the decision of Hon'ble Apex Court in case of CIT vs. Alom Extrusions Ltd. (2009) 319 ITR 306 (SC) as well as in CIT vs. Vinay Cement Ltd. 213 ITR 268 (SC), operative part thereof is extracted for ready perusal as under:-
" The deletion with effect from April 1, 2004 by the Finance Act, 2003 of the second proviso to section 43B of the Income-tax Act, 1961, which stipulates that contributions to the provident fund and Employees State Insurance fund should be made within the time mentioned in section 36(1)(va), that is, the time allowed under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952, as well as the Employees State Insurance Act, 1948, is treated as retrospective in nature. If the employees' contribution is not deposited by the due date prescribed under the relevant Acts and is deposited thereafter, the employer not only pays interest on delayed payment but can incur penalties also, for which specific provisions are made in the those Acts. In so far as the Income-tax Act, 1961, is concerned, the assessee can get the benefit of deduction of the payments, if the actual payment is made before the return is filed.
Where for the assessment year 2002-03 the assessee had deposited employer's contribution as well as employees' contribution towards provident fund and ESI after the due date, as prescribed under the relevant Act/Rules but before the due date for filing the return under the Income-tax Act :14 ITA No.5204/Del./2017
Held accordingly, that no disallowance could be made in view of the provisions of section 43B as amended by the Finance Act, 2003."
22. In view of what has been discussed above, when the assessee has deposited the employees contribution of PF on 25.04.2012 as against the due date of 20.04.2012 but well before filing the return of income, we find no illegality or perversity in the deletion made by the ld. CIT (A), hence ground no.3 is determined against the Revenue.
23. In the result, the appeal filed by the Revenue is dismissed.
Order pronounced in open court on this 29th day of July, 2021.
SD/- SD/-
(ANIL CHATURVEDI) (KULDIP SINGH)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated the 29TH day of July, 2021.
TS
Copy forwarded to:
1.Appellant
2.Respondent
3.CIT
4.CIT(A)-39, New Delhi.
5.CIT(ITAT), New Delhi. AR, ITAT
NEW DELHI.