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2022 (8) TMI 361 - HC - Income TaxDisallowance of consumption incentive - disallowance of the expenses claimed under the head consumption debtors the said addition was made by the AO on the ground that these expenses are in the nature of a provision - HELD THAT - As evident from the record that the aforesaid disallowance has been deleted by the CIT(A) and ITAT, after considering the material on record and satisfying itself that it is an ascertained liability of the assessee which is liable to be allowed. This is a finding of fact returned by CIT(A) and upheld by ITAT. The chart filed by the Respondent evidencing that this expense was consistently allowed since AY 2004-05 and allowed by the AO is also not in dispute. The consistency rule has been enunciated in M/s Radhasaomi Satsang, Saomi Bagh, Agra 1991 (11) TMI 2 - SUPREME COURT - no infirmity in the order passed by ITAT upholding the decision of CIT(A) deleting the disallowance on account of consumption debtors . Disallowance u/s 14A - Expenditure incurred on earning exempt income - HELD THAT - As per the law settled by this court in the case of Cheminvest Ltd. 2015 (9) TMI 238 - DELHI HIGH COURT and PCIT vs. IL FS Energy Development Company Ltd. 2017 (8) TMI 732 - DELHI HIGH COURT the disallowance to be made under Section 14A cannot be in excess of the exempt income earned by the assessee. The counsel for the revenue has placed reliance on the CBDT circular 5/2014 to contend that disallowance u/s 14A would be attracted even if corresponding exempt income is not earned during the financial year. The said circular cannot be relied upon since its contrary to the law laid down by this Court. There is no challenge to the finding of the CIT (A) and the ITAT that AO failed to record satisfaction before invoking the provisions of Section 14A which is the condition precedent for making the addition. In this view of the matter the additional disallowance made by the AO is impermissible and contrary to law. ITAT was correct in upholding the order of the CIT(A) deleting the disallowance. Disallowance u/s 36(1)(va) on account of late deposit of employee's contribution to PF - Scope of amendment - HELD THAT - Memorandum acknowledges that courts have taken a view that the 'due date' to be considered for the purposes of Section 36(1)(va) of the Act is under Section 43B and it is in that background that the Explanation has been inserted to alter this position. Further, the Memorandum explicitly stipulates that the said amendment will take effect from 1st April 2021 and it cannot therefore cannot apply to assessment year 2012-13 under consideration. The legislature is therefore conscious that the Explanation seeks to change the law as it stands on date and is therefore intended to apply to subsequent assessment years. The contention of the revenue therefore that the said amendment is retrospective cannot be accepted. amendment to Section 36(1)(va), which is 'for removal of doubts', cannot be presumed to be retrospective even where such language is used, if it alters or changes the law as it earlier stood. It is also noted that in the facts of the case, the due date for depositing the Employees contribution to the Provident Fund was 20th April, 2012 and the assessee had deposited the same on 25th April, 2012. There is no dispute that the amount stands deposited before the filing of the return. We, therefore, find that there is no ground for taking a view different from the view consistently held by this court since AIMIL Ltd. 2009 (12) TMI 38 - DELHI HIGH COURT .
Issues Involved:
1. Disallowance of consumption incentive. 2. Disallowance under Section 14A of the Income Tax Act. 3. Disallowance under Section 36(1)(va) of the Income Tax Act on account of late deposit of employee's contribution to PF. Detailed Analysis: Disallowance of Consumption Incentive: Issue: The AO disallowed expenses under the head 'consumption debtors' on the ground that these expenses are in the nature of a provision. Findings: - The CIT(A) reversed the disallowance, stating that the liability was an ascertained one and allowable as per the mercantile system of accounting. - The ITAT upheld the CIT(A)'s decision, noting that the assessee consistently followed the mercantile system and provided detailed records of the advertisers to whom the incentive was extended. - The High Court found no error in the ITAT's decision, emphasizing the rule of consistency as enunciated in M/s Radhasaomi Satsang, Saomi Bagh, Agra v. Commissioner of Income Tax. Conclusion: The High Court upheld the deletion of the disallowance on account of 'consumption debtors', affirming that it was an ascertained liability consistently allowed in previous assessment years. Disallowance under Section 14A of the Act: Issue: The AO invoked Section 14A r/w Rule 8D, making an additional disallowance of Rs. 9,90,264/-. Findings: - The CIT(A) deleted the disallowance, stating that the AO failed to record satisfaction before invoking Section 14A. - The ITAT upheld the CIT(A)'s decision, noting that disallowance under Section 14A cannot exceed the exempt income earned, which was Rs. 2,34,585/-. - The High Court referenced the settled principle that disallowance cannot exceed exempt income and noted the AO's failure to record satisfaction. Conclusion: The High Court upheld the ITAT's decision, affirming that the additional disallowance under Section 14A was impermissible and contrary to law. Disallowance under Section 36(1)(va) of the Act on Account of Late Deposit of Employee's Contribution to PF: Issue: The AO disallowed Rs. 43,14,198/- for late deposit of employee's contribution to PF. Findings: - The CIT(A) deleted the disallowance, holding that the 'due date' is the date of filing the return under Section 139(1) of the Act. - The ITAT upheld the CIT(A)'s decision, noting that the contribution was paid before filing the return of income. - The High Court referenced multiple judgments, including CIT vs. AIMIL Ltd., affirming that the due date for depositing employee contributions is the date for filing the return under Section 139(1). - The High Court rejected the Revenue's reliance on the Finance Act, 2021 amendments, noting that the amendments were prospective and not applicable to the assessment year in question. Conclusion: The High Court upheld the ITAT's decision, affirming that the disallowance for late deposit of employee's contribution to PF was not justified. Final Judgment: The High Court found no substantial question of law and upheld the ITAT's order dated 29th July, 2021, dismissing the Revenue's appeal.
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