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TMI Blog2023 (7) TMI 1454X X X X Extracts X X X X X X X X Extracts X X X X ..... allowance of any part of its claim for deduction of interest expenditure was called for u/s 14A r.w Rule 8D(2)(ii) of the Income tax Rules, 1963. Our aforesaid view is supported by the judgment of HDFC Bank [ 2016 (3) TMI 755 - BOMBAY HIGH COURT] wherein it was held that no disallowance u/s.14A can be made in respect of interest paid on borrowings if assessee's own funds and non-interest-bearing funds exceeded the amount of investments in tax free securities. Disallowance u/s 40(a)(ia) - transmission/wheeling charges u/s 194C or 194-I or u/s.194J - HELD THAT:- Similar view had been taken in the case of CIT Vs. Maharashtra State Electricity Distribution Co. Ltd [ 2015 (5) TMI 396 - BOMBAY HIGH COURT] wherein, it was observed by the Hon ble High Court that as the transmission charges and/or Wheeling charges were not amounts paid under any arrangement for use of land, building, plan machinery, equipment, furniture, fitting etc. and therefore, could not be brought within the meaning of rent. Equally, it was observed that the payments were not fees for technical services. It was also held by the Hon ble High Court that the expression of Transmission charges and/or Wheeling charges e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... firmity in the view taken by the CIT(Appeals), we uphold the same Disallowance u/s 40(a)(ia) of transmission/wheeling charges - HELD THAT:- As in own case while adjudicating the Ground of appeal No.3, the present issue is disposed off on the same terms. Accordingly, finding no infirmity in the view taken by the CIT(Appeals) who had rightly vacated the disallowance u/s 40(a)(ia) of the Act of transmission charges we uphold the same. Thus, the Ground of appeal No.3 raised by the revenue is dismissed. - SHRI RAVISH SOOD, JUDICIAL MEMBER AND SHRI ARUN KHODPIA, ACCOUNTANT MEMBER For the Assessee : Ms. Puja Bajaj, CA For the Revenue : Shri Piyush Tripathi, Sr. DR ORDER PER RAVISH SOOD, JM: The captioned appeals filed by the revenue are directed against the respective orders passed by the CIT(Appeals)-I, Raipur (C.G.) dated 19.06.2020, which in turn arises from the orders passed by the A.O u/s.143(3) of the Income-tax Act, 1961 (for short Act ), dated 17.03.2015 29.03.2016 for A.Ys. 2012-13 2013-14, respectively. As common issues are involved in the captioned appeals, therefore, the same are being taken up and disposed off by way of a consolidated order. 2. Although the registry had poi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eal before the CIT(Appeals) who partly allowed the same in so far the additions/disallowances were concerned. 7. The revenue being aggrieved with the order of the CIT(Appeals) has carried the matter in appeal before us. 8. We have heard the ld. authorized representatives of both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by them to drive home their respective contentions. (A). Re: Disallowance of Rs. 1,36,688/- : 9. It transpires on a perusal of the orders of the lower authorities that the AO had disallowed the assessee s claim for deduction of certain expenses aggregating to Rs. 1,36,688/-, viz. (i) festival expenses: Rs.87,033/-; (ii) gift expenses: Rs.46,470/-; and (iii) Puja expenses: Rs. 3,185/-. On appeal, the CIT(Appeals) though upheld the disallowance of the assessee s claim for deduction of Puja expenses of Rs. 3,185/- but had vacated the remaining disallowances. At this stage, we may herein observe that though the CIT(Appeals) had vacated the disallowance of Rs. 1,33,503/- (out of Rs. 1,36,688/- made by the AO) while for had upheld the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and their admissibility cannot be doubted. However, it must be pointed out that the Hon'ble jurisdictional High court has held that Puja expenses are not an admissible expense hence respectfully following the decision Hon ble jurisdictional High Court, the Puja expenses claimed of Rs.3,185 is confirmed and the balance amount is allowed. This ground of appeal is partly allowed. We find that the Tribunal in the case of DCIT Vs. Gowawari Power and Ispat Ltd. (2022) 193 ITD 869 (Raipur) while vacating a similar disallowance had observed as under: 41. We have considered the rival arguments made by both the sides and perused the material available on record. We find identical issue had come up before the Tribunal in assessee's own case wherein the Tribunal, considering the CBDT Circular No.17(F.No.27(2)-IT/43) dated 06.05.1983 and another CBDT Circular No.13A/20/68-IT(A-II) dated 03.10.1968 wherein it has been held that the expenses incurred on the occasion of Deepawali and Mahurat are in the nature of business expenditure had allowed and granted relief to Rs.6,54,900/-. Since in the instant case such relief granted by Id. CIT(A) is only Rs.3,50,000/- towards purchase and distr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Ld. AR submitted that the said factual position could also be safely be gathered from the computation of income of the assessee company, Page 20-23 of APB. It was submitted by the Ld. AR that the CIT(Appeals) had vacated the disallowance made by the AO u/s 14A for two reasons, viz. (i). that as the assessee company had substantial amount of interest free funds available with it to make investments in exempt dividend income yielding unquoted equity shares, therefore, no disallowance of assessee s claim for deduction of interest expenses was called for in its hands; and (ii). that the assessee had not earned any exempt income during the year. The Ld. AR in order to buttress her aforesaid contention that in case of availability of sufficient interest free funds with an assessee company which would justifiably explain its investment in exempt income yielding assets, no disallowance could be made u/s 14A of the Act, had drawn support from the following judicial pronouncements: (i) PCIT Vs. Envestor Ventures Ltd. (2021) 431 ITR 221 (Mad.) (ii) PCIT Vs. State Bank of Patiala (2017) 393 ITR 476 (P H) (iii) HDFC Bank Vs. DCIT (2016) 383 ITR 529 (Bom.) (iv) South Indian Bank Ltd. Vs. CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich have been used for fixed assets and business purposes as stated earlier. It was demonstrated that the appellant company had non-interest bearing funds at its disposal which was more than that of interest bearing funds. The Hon'ble Bombay High court in the case of CIT v HDFC Bank in ITA 330 of 2012 held that no disallowance u/s. 14A can be made in respect of interest paid on borrowings if assessee's own funds and non interest bearing funds exceeds investments in tax free securities. The appellant company had produced audited books of accounts and tax audit reports which the AO has himself mentioned in the assessment order, which contained all the relevant details regarding the sources from where the investments have been made and hence the contentions of the AO that necessary details were not produced by the appellant or the investments made were not substantiated appears incorrect. A cursory glance at the balance sheet, whose facts and figures have been narrated above, would have made it clear to the A.O that interest bearing funds have been utilized for no purpose other than that of the business carried on by the appellant company and investments have been made from ow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had rightly disallowed the said expenditure of Rs.1,18,63,401/- u/s 40(a)(ia) of the Act. 21. Per contra, the Ld. AR submitted that the A.O had not mentioned any section as to under which the assessee was required to make any deduction of tax at source. It was submitted by the Ld. AR that as observed by the CIT(Appeals) and, rightly so, as no TDS was required to be made on the transmission/wheeling charges under any of the sections, i.e u/s.194C or u/s.194I or u/s.194J of the Act, therefore, no disallowance was called for in the hands of the assessee company u/s 40(a)(ia) of the Act. Ld. AR in support of his aforesaid contention relied on the following judicial pronouncements: (i) CIT vs Delhi Transco Ltd. (2016) 380 ITR 398 (Del.) (ii) CIT vs Maharashtra State Electricity Distribution Co. Ltd. (2015) 375 ITR 27 (Bom.) (iii) Auro Mira Biopower India (P) Ltd. vs ITO (2014) 42 CCH 141 (Chen. Trib.), in ITA No. 2584 to 2590/Mds/2014 dt. 12.12.2014 (iv) Noida Power Co. Ltd. vs ACIT (2018) 52 CCH 196 (Del. Trib.); ITA No. 4878/Del/2016 dt. 19.03.2018 (v) GRIDCO Ltd. vs ACIT in ITA No. 404/Ctk./201 1 dt. 17.11.2011; (2011) 30 CCH 578 (Cuttack) (Trib.) (vi) Chhattisgarh State Electricity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pay certain charges to the company which is called wheeling charges. The charge is payment for using of infrastructure set up of the transmission company which is a state govt undertaking. Whether this charge is similar to the rent paid for renting house property has been decided in quite a few cases. Sec 194-I puts obligation of person paying rent to make TDS from the rent payment. Rent in the impugned provision is defined as payment by whatever name called under any lease, sub-lease, tenancy or any other agreement or arrangement for the use of any machinery, plant or equipment, fitting etc. The transmission lines are not taken under lease or tenancy by private generators from state govt. who own all the high voltage transmission lines. This aspect is explained in the case of GRIDCO Ltd. vs ACIT in ITA No.404/CTK/2011. In this decision the Hon'ble Cuttack tribunal after analyzing the teem 'equipment' and facility created by the service provider and its use by private parties, came to the conclusion that no TDS can be made out of transmission charges. It was just a service obtained from the govt. electricity company which had got infrastructure in the form of equipment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to Section 194 I, as we have noted above, defines rent as any payment, by whatever name called, under any lease, sublease, or tenancy or any other agreement or arrangement for the use of land, building, plant, machinery or equipment etc. As evident from a plain reading of the agreements under which impugned payments have been made, the payments have been made for the services of transmission of electricity and not the use of transmission wires per se. It is a significant fact that these transmission lines are not only being used for transmission of electricity to the assessee but also for transmission to electricity to various other entities. The transmission lines continue to be not only under control and possession of the PGCIL in legal terms, but, what is more important, these transmission lines are effectively in the control of PGCIL, without any involvement of the assessee in actual operations of the same. On these facts, in our humble understanding, the assessee has made the payments for transmission of electricity in which transmission lines have been used rather than for the use of transmission lines per se. The payments could be said to have been made for the use of transm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he other hand, if the customer entrusts to the assessee the work of achieving a certain desired result and that involves the use of goods belonging to the assessee and rendering of several other services and the goods used by the assessee to achieve the desired result continue to be in the effective and general control of the assessee, then, the transaction will not be a transfer of the right to use goods falling within the extended definition of sale . Let me now clarify the position further, with an illustration which is a variation of the illustration used by the Andhra Pradesh High Court in the case of Rashtriya Ispat Nigam Ltd. vs. CTO. (i) A customer engages a carrier (transport operator) to transport one consignment (a full lorry load) from place A to B, for an agreed consideration which is called freight charges or lorry hire. The carrier sends its lorry to the customer s depot, picks up the consignment and proceeds to the destination for delivery of the consignment . The lorry is used exclusively for the customer s consignment from the time of loading, to the time of unloading at destination. Can it be said that right to use of the lorry has been transferred by the carrier ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een made for the use of these transmission lines or other related infrastructure. Viewed in this perspective, Section 194 I has no application so far as the impugned payments for transmission of electricity is concerned. For this short reason alone the impugned demands must be held to unsustainable in law. Also, we find that similar view had been taken by the Hon ble High Court of Bombay in the case of CIT Vs. Maharashtra State Electricity Distribution Co. Ltd. (2015) 375 ITR 23 (Bom.) wherein, it was observed by the Hon ble High Court that as the transmission charges and/or Wheeling charges were not amounts paid under any arrangement for use of land, building, plan machinery, equipment, furniture, fitting etc. and therefore, could not be brought within the meaning of rent. Equally, it was observed that the payments were not fees for technical services. It was also held by the Hon ble High Court that the expression of Transmission charges and/or Wheeling charges entails distribution of electricity in the area of the Corporation and they could not be subject to provisions of Section 194-I of the Act. Also, we find that similar issue had been adjudicated by the Tribunals in favour of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee s claim for deduction of the aforesaid expenditure was not admissible. As is discernible from the records, the expenses were incurred by the assessee company for its business purposes and were duly recorded in the books of account. The CIT(Appeals) had deleted the ad-hoc disallowance of ash handling expenses of Rs.5,17,200/- after relying upon a host of judicial pronouncements, observing as under: I have considered the grounds of appeal, gone through the submissions of the appellant and seen the order of the AO. I agree with the Ld. counsel that the disallowances have been made without bringing any cogent material on record. It has not been pointed out by the AO as to which of the vouchers and bills were not verifiable and how such expenses claimed are not admissible to the appellant company. When the business expenses claimed are related with the business of the appellant and have been incurred for business purposes and are recorded in the books of accounts I see no justification for the disallowances, as has been made by the AO. In the case of Ashok Kumar Haria reported in 16 TTJ 493 the tribunal held that just for the absence of vouchers the claims could not be disallowed. Fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not only both the lower authorities had by erroneously referring to the benefit test disallowed the assessee s claim for expenditure, but most surprisingly and rather beyond comprehension had restricted the said claim for deduction in the same ratio i.e., 5.44% in which sales for the year under consideration had witnessed an increase as in comparison to that of the immediately preceding year. We are unable to comprehend much the less subscribe to the aforesaid novel method adopted/subscribed to by the lower authorities, which we would not hesitate to observe is nothing short of an arithmetical formula adopted by the Assessing Officer for partly declining the assessee's claim for deduction of commission expenses. Although a steep rise of an expenditure during a year would raise serious doubts as regards the genuineness of the claim for deduction of the same by the assessee, but then, as observed by us hereinabove, the allowability or not of the same has to be tested as per the mandate of Section 37 of the Act; and not on the touchstone of satisfaction of the benefit test as had been done by the A.O in the present case. Backed by our aforesaid observations, we are of the conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , it is a matter of fact borne from record that the Hon ble Supreme Court in the case of Checkmate Services Pvt. Ltd. Vs. Commissioner of Income Tax- I, Civil Appeal No.2833 of 2016 dated 12.10.2022 , while clarifying the position of law, had held that the delayed deposit of employee s share of contribution towards labour welfare funds, viz. Employee s Provident fund (EPF) and Employee s State Insurance (ESI) is liable to be disallowed as per the mandate of Section 36(1)(va) r.w.s 2(24)(x) of the Act. 32. Considering the law laid down by the Hon ble Apex Court in the case of Checkmate Services P. Ltd. Vs. Commissioner of Income Tax-I (supra), we are of the considered view that the delayed deposit of employee s share of contribution towards EPF is liable to be disallowed as per the mandate of Section 36(1)(va) r.w.s. 2(24)(x) of the Act. The Hon ble Apex Court had observed that the employee s share of contribution towards ESI EPF which was deposited by the assessee beyond the due dates prescribed under the said respective Acts, would by virtue of Section 36(1)(va) r.w.s. 2(24)(x) of the Act constitute the income of the assessee. It was observed by the Hon ble Apex Court as under: An ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee to comply with those conditions, would render the claim vulnerable to rejection. In this scheme the deduction made by employers to approved provident fund schemes, is the subject matter of Section 36 (iv). It is noteworthy, that this provision was part of the original IT Act; it has largely remained unaltered. On the other hand, Section 36(1)(va) was specifically inserted by the Finance Act, 1987, w.e.f. 01-04-1988. Through the same amendment, by Section 3(b), Section 2(24) which defines various kinds of income inserted clause (x). This is a significant amendment, because Parliament intended that amounts not earned by the assessee, but received by it, - whether in the form of deductions, or otherwise, as receipts, were to be treated as income. The inclusion of a class of receipt, i.e., amounts received (or deducted from the employees) were to be part of the employer/assessee s income. Since these amounts were not receipts that belonged to the assessee, but were held by it, as trustees, as it were, Section 36(1)(va) was inserted specifically to ensure that if these receipts were deposited in the EPF/ESI accounts of the employees concerned, they could be treated as deductions. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oyees State Insurance Act, 1948, or any other fund for the welfare of employees - 12.1. The existing provisions provide for a deduction in respect of any payment by way of contribution to the provident fund or a superannuation fund or any other fund for welfare of employees in the year in which the liabilities are actually discharged (Section 43B). The effect of the amendment brought about by the Finance act, is that no deduction will be allowed in the assessment of the employer, unless such contribution is paid into the fund on or before the due date. Due date means the date by which an employer is required to credit the contribution to the employees account in the relevant fund or under the relevant provisions of any law or term of the contract of service or otherwise. (Explanation to Section 36 (1) of the Finance Act) 12.2. In addition, contribution of the employees to the various funds which are deducted by the employer from the salaries and wages of the employees will be taxed as income within brackets insertion of new [clause (x) in clause (24) of Section 2] of the employer, if such contribution is not credited by the employer in the account of the employee in the relevant fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, 1989 with effect from 01.04.1989 and read as under: Provided further that no deduction shall in respect of any sum referred to in clause (b) be allowed unless such sum has actually been paid in cash or to by issue of a cheque or draft or by any other mode on or before the due date as defined in the explanation below Clause (va) of sub-section (1) of Section 36, and where such payment has been made otherwise than in cash, the same has been realised within 15 days from the due date. 40. The position in law remained unchanged for 14 years. The Central Government then constituted the Kelkar Committee, to suggest tax reforms. The report suggested amendments inter alia, to Section 43B. The relevant extract of the report is as follows: In terms of the provisions of section 43B of the Income-tax Act, deduction for statutory payments relating to labour, taxes and State and public financial institutions are allowed as deductions, if they are paid during the financial year. However, under the provisions payment of taxes and interest to State and public financial institution are deemed to have been paid during the financial year even if they are paid by the due date of filing of return. Fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fect from 1st April, 2004 and will, accordingly, apply in relation to the assessment year 2004-2005 and subsequent years. 42. The rationale for introduction of Section 43B was explained by this court in M.M. Aqua Technologies Ltd. vs. Commissioner of Income Tax, Delhi:16 19. The object of Section 43B, as originally enacted, is to allow certain deductions only on actual payment. This is made clear by the non- obstante Clause contained in the beginning of the provision, coupled with the deduction being allowed irrespective of the previous years in which the liability to pay such sum was incurred by the Assessee according to the method of accounting regularly employed by it. In short, a mercantile system of accounting cannot be looked at when a deduction is claimed under this Section, making it clear that incurring of liability cannot allow for a deduction, but only actual payment , as contrasted with incurring of a liability, can allow for a deduction. 43. This condition, i.e., of payment of actual amount on or before the due date to enable deduction, continued for 14 years. By the amendment of 2003, the second proviso was deleted. This court interpreted the law, in the light of thes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would be admissible for the accounting year. This proviso, however, did not apply to the contribution made by the assessee(s) to the labour welfare funds. To this effect, the first proviso stood introduced with effect from 1-4-1988. *** 15. By the Finance Act, 2003, the amendment made in the first proviso equated in terms of the benefit of deduction of tax, duty, cess and fee on the one hand with contributions to the Employees' Provident Fund, superannuation fund and other welfare funds on the other. However, the Finance Act, 2003, bringing about this uniformity came into force with effect from 1-4-2004. Therefore, the argument of the assessee(s) is that the Finance Act, 2003, was curative in nature, it was not amendatory and, therefore, it applied retrospectively from 1-4-1988, whereas the argument of the Department was that the Finance Act, 2003, was amendatory and it applied prospectively, particularly when Parliament had expressly made the Finance Act, 2003 applicable only with effect from 1-4-2004. *** 18. However, as stated above, the second proviso resulted in implementation problems, which have been mentioned hereinabove, and which resulted in the enactment of the Finan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 31st March (end of accounting year) but before filing of the returns under the Income Tax Act and the date of payment falls after the due date under the Employees' Provident Fund Act, they will be denied deduction for all times. In view of the second proviso, which stood on the statute book at the relevant time, each of such assessee(s) would not be entitled to deduction under Section 43- B of the Act for all times. They would lose the benefit of deduction even in the year of account in which they pay the contributions to the welfare funds, whereas a defaulter, who fails to pay the contribution to the welfare fund right up to 1-4-2004, and who pays the contribution after 1-4-2004, would get the benefit of deduction under Section 43-B of the Act. 44. There is no doubt that in Alom Extrusions, this court did consider the impact of deletion of second proviso to Section 43B, which mandated that unless the amount of employers contribution was deposited with the authorities, the deduction otherwise permissible in law, would not be available. This court was of the opinion that the omission was curative, and that as long as the employer deposited the dues, before filing the return of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 2003, will operate with effect from 1st April, 2004. However, the matter before us involves the principle of construction to be placed on the provisions of Finance Act, 2003 . 46. A discussion on the Principles of interpretation of tax statutes is warranted. In Ajmera Housing Corporation Ors. vs. Commissioner of Income17 this court held as follows: 27. It is trite law that a taxing statute is to be construed strictly. In a taxing Act one has to look merely at what is said in the relevant provision. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. There is no room for any intendment. There is no equity about a tax. (See: Cape Brandy Syndicate v. Inland Revenue Commissioners (1921) 1 KB 64 and Federation of A.P. Chambers of Commerce and Industry and Ors. v. State of A.P. and Ors.(2000) 6 SCC 550. In interpreting a taxing statute, the Court must look squarely at the words of the statute and interpret them. Considerations of hardship, injustice and equity are entirely out of place in interpreting a taxing statute. (Also see: Commissioner of Sales Tax, Uttar Pradesh v. The Modi Sugar Mills Ltd. 1961 (2) SCR 189.) 47. Likewise, this court unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion to any provident fund or superannuation fund. It is noteworthy that the legislature explained the inclusion of these deductions by citing certain practices of evasion of statutory liabilities and other liabilities for the welfare of employees... *** 23. With the passage of time, the legislature inserted more deductions to Section 43B including cess, bonus or commission payable by employer, interest on loans payable to financial institutions, scheduled banks etc., payment in lieu of leave encashment by the employer and repayment of dues to the railways. Thus understood, there is no oneness or uniformity in the nature of deductions included in Section 43B. It holds no merit to urge that this Section only provides for deductions concerning statutory liabilities. Section 43B is a mix bag and new and dissimilar entries have been inserted therein from time to time to cater to different fiscal scenarios, which are best determined by the government of the day. It is not unusual or abnormal for the legislature to create a new liability, exempt an existing liability, create a deduction or subject an existing deduction to override regulations or conditions. 24. The leave encashment scheme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s down that failure to comply with the said requirement leads to severe consequences, such requirement would be mandatory. It is the cardinal rule of interpretation that where a statute provides that a particular thing should be done, it should be done in the manner prescribed and not in any other way. It is also settled rule of interpretation that where a statute is penal in character, it must be strictly construed and followed. Since the requirement, in the instant case, of obtaining prior permission is mandatory, therefore, non-compliance with the same must result in cancelling the concession made in favour of the grantee, the respondent herein. See for e.g., Eagle Flask Industries Ltd. v. Commissioner of Central Excise, 2004 Supp (4) SCR 35. State of Jharkhand v Ambay Cements, (2005) 1 SCC 368. This was also reaffirmed in a number of judgments, such as Commissioner of Income Tax v. Ace Multi Axes Systems Ltd.22 50. The Constitution Bench, in Commissioner. of Customs v. Dilip Kumar Co. 23 endorsed as following: 24. In construing penal statutes and taxation statutes, the Court has to apply strict rule of interpretation. The penal statute which tends to deprive a person of right t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s cited on behalf of the assessee i.e., Commissioner of Income-Tax v. Aimil Ltd.24; Commissioner of Income-Tax and another v. Sabari Enterprises25; Commissioner of Income Tax v. Pamwi Tissues Ltd.26; Commissioner of Income-Tax, Udaipur v. Udaipur Dugdh Utpadak Sahakari Sandh Ltd.27 and Nipso Poly fabriks (supra) would reveal that in all these cases, the High Courts principally relied upon omission of second proviso to Section 43B (b). No doubt, many of these decisions also dealt with Section 36(va) with its explanation. However, the primary consideration in all the judgments, cited by the assessee, was that they adopted the approach indicated in the ruling in Alom Extrusions. As noticed previously, Alom Extrutions did not consider the fact of the introduction of Section 2(24)(x) or in fact the other provisions of the Act. 52. When Parliament introduced Section 43B, what was on the statute book, was only employer s contribution (Section 34(1)(iv)). At that point in time, there was no question of employee s contribution being considered as part of the employer s earning. On the application of the original principles of law it could have been treated only as receipts not amounting to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entitle an assessee to the benefit of deduction from the total income. The essential objective of Section 43B is to ensure that if assessees are following the mercantile method of accounting, nevertheless, the deduction of such liabilities, based only on book entries, would not be given. To pass muster, actual payments were a necessary pre-condition for allowing the expenditure. 53. The distinction between an employer s contribution which is its primary liability under law in terms of Section 36(1)(iv), and its liability to deposit amounts received by it or deducted by it (Section 36(1)(va)) is, thus crucial. The former forms part of the employers income, and the later retains its character as an income (albeit deemed), by virtue of Section 2(24)(x) - unless the conditions spelt by Explanation to Section 36(1)(va) are satisfied i.e., depositing such amount received or deducted from the employee on or before the due date. In other words, there is a marked distinction between the nature and character of the two amounts the employer s liability is to be paid out of its income whereas the second is deemed an income, by definition, since it is the deduction from the employees income an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... easons, this court does not find any reason to interfere with the impugned judgment. The appeals are accordingly dismissed. As the issue involved in the present appeal is no more res-integra pursuant to the aforesaid judgment of the Hon ble Apex Court in the case of Checkmate Services P. Ltd. Vs. Commissioner of Income Tax-I (supra),, therefore, in terms of our aforesaid observations we respectfully follow the same and uphold the view taken by the AO and sustain the disallowance of the delayed deposit of employees share of contribution towards EPF of Rs.1,48,041/-. Thus, the Ground of appeal No. 1 raised by the revenue is allowed in terms of our aforesaid observations. (B). Re : Disallowance u/s 14A r.w Rule 8D : Rs. 65,59,256/- 33. We shall now deal with the grievance of the revenue that the CIT(Appeal) had erred in deleting the disallowance of Rs.65,59,256/- made by the A.O u/s.14A r.w Rule 8D. 34. At the threshold it was averred by the ld. AR that as the assessee company had not earned any exempt income during the year under consideration, therefore, no disallowance was called for in its hands u/s 14A of the Act. It was submitted by the Ld. AR that in absence of any exempt incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... charges : Rs. 1,54,13,599/-. 36. We shall now take up the grievance of the revenue that the CIT(Appeals) had erred in deleting the disallowance u/s 40(a)(ia) of the Act of the assessee s claim for deduction of transmission charges of Rs.1,54,13,599/-. 37. As it was admitted by both the parties that the facts involved as regards the aforesaid issue i.e disallowance of transmission charges u/s.40(a)(ia) of the Act remains the same as were there before us in the revenues appeal for the immediately preceding year i.e AY 2012-13 in ITA No.91/RPR/2020, therefore, adopting the same reasoning as was recorded by us in ITA No.91/RPR/2020 while adjudicating the Ground of appeal No.3, the present issue is disposed off on the same terms. Accordingly, finding no infirmity in the view taken by the CIT(Appeals) who had rightly vacated the disallowance u/s 40(a)(ia) of the Act of transmission charges of Rs. 1,54,13,599/- (supra), we uphold the same. Thus, the Ground of appeal No.3 raised by the revenue is dismissed in similar terms as were recorded by us in ITA No.91/RPR/2020 while adjudicating the Ground of appeal No.3. 38. In the result, appeal of the revenue in ITA No.92/RPR/2020 for A.Y. 2013-1 ..... 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