+Ita 227/2022Pr. Commissioner Of Income Tax -7 v. Tv Today Network Ltd

$~21 *IN THE HIGH COURT OF DELHI AT NEW DELHI +ITA 227/2022PR. COMMISSIONER OF INCOME TAX -7..... AppellantThrough :Mr.PuneetRai,SeniorStandingCounselforRevenuealongwithMs.Adeeba Mujahid, Junior StandingCounsel for Revenue and Mr.KaranPandey, Advocate. versus TV TODAY NETWORK LTD...... RespondentThrough :Mr. Salil Aggarwal, Senior Advocatealong with Mr. Madhur Aggarwal andMr.Uma Shankar, Advocates. % Date of Decision: 27[th]July, 2022 CORAM: HON'BLE MR. JUSTICE MANMOHANHON'BLE MS. JUSTICE MANMEET PRITAM SINGH ARORA J U D G M E N T MANMEET PRITAM SINGH ARORA, J (Oral): 1.The present income tax appeal filed by Revenue impugns order dated29[th]July, 2021 passed by the Income Tax Appellate Tribunal (‘ITAT’) forthe Assessment Year (‘AY’) 2012-13 in ITA No. 5204/Del/2017.The facts giving rise to the present appeal are as follows: 2.The assessee i.e. the respondent herein, was incorporated on 28[th]December, 1999 and is engaged in the business of broadcasting, telecasting,relaying, transmitting or distributing audio, video or other programmes and ITA 227/2022 software for television, radio and other media. 3.The assessee filed its Income Tax Return (‘ITR’) for the relevant AY2012-13 on 29[th]September, 2012 declaring an income of Rs.25,54,27,410/-.4.The ITR of the assessee was selected for scrutiny under CASS.Accordingly, a notice under Section 143 (2) of the Income Tax Act, 1961(‘the Act’) was issued on 16[th]August, 2013. Further, a notice under Section142 (1) of the Act along with a questionnaire was issued on 16[th]April, 2014and 7[th]November, 2014 and served upon the assessee to furnish the requisitedetails. The assessee complied with the aforesaid notice and furnished therequisite details and placed on record the documents sought by theAssessing Officer (‘AO’). 5.Vide the assessment order dated 16[th]March, 2015, the AO madeadditions to the extent of Rs.5,45,40,731/- and thus, determined the totalincome of the assessee atRs.30,99,68,140/-.The break-up of thedisallowances, leading to the additions as, made by the AO is as under :- The subject matters of the present appeal are the additions made by the AOat Serial Nos. 2, 4 and 5 of this table, which have since been deleted by the ITA 227/2022 appellate authorities below. 6.Aggrieved by the assessment order passed by the AO, the assesseefiled an appeal before the Commissioner of Income Tax (Appeals)(‘CIT(A)’), which appeal was partly allowed vide order dated 8[th]February,2017. The CIT (A) after perusing the facts on record and following thejudgments of this Court reversed the following disallowances and thecorresponding additions to the income stood deleted: (i)disallowance under the head 'consumption debtors';(ii)disallowanceonaccountoflatedepositofemployeescontribution to provident fund u/s 36(1) (va) of the Act;(iii)disallowance under the head of section 14A of the Act readwith Rule 8D. 7.Aggrieved by the order of the CIT(A) to the extent it reversed thedisallowances made by the AO, the Revenue filed an appeal before theITAT. The ITAT after perusing the documents and following thejudgements passed by this Court, dismissed the appeal filed by Revenueagainst the order of the CIT (A), vide impugned order dated 29[th]July, 2021. 8.The learned senior counsel for the respondent-assessee was present onadvance notice. 9.We have heard the counsel for the parties. Disallowance of consumption incentive 10.With respect to the disallowance of the expenses claimed under thehead ‘consumption debtors’ the said addition was made by the AO on theground that these expenses are in the nature of a provision. The same wasdeleted by the CIT(A) after returning a finding that the liability was clearlyan ascertained one and allowable as per the mercantile system of accounting ITA 227/2022 Page 3 of 21 followed by the assessee. It was noted that this was also the view taken byCIT (A) in assessee's own case for AYs 2008-09, 2009-10 and 2010-11. 8.The learned senior counsel for the respondent-assessee was present onadvance notice. 9.We have heard the counsel for the parties. Disallowance of consumption incentive 10.With respect to the disallowance of the expenses claimed under thehead ‘consumption debtors’ the said addition was made by the AO on theground that these expenses are in the nature of a provision. The same wasdeleted by the CIT(A) after returning a finding that the liability was clearlyan ascertained one and allowable as per the mercantile system of accounting ITA 227/2022 Page 3 of 21 followed by the assessee. It was noted that this was also the view taken byCIT (A) in assessee's own case for AYs 2008-09, 2009-10 and 2010-11. 11.The ITAT in the impugned order similarly observed that a coordinatebench of the Tribunal in assessee's own case for AYs 2008-09 and 2009-2010 has upheld the assessee's claim for the said expenses of 'consumptiondebtors'. The ITAT thus, held that since the assessee has been consistentlyfollowing the mercantile system of accounting, liability brought on record isan ascertained liability. It also held that the party-wise detail of theadvertisers to whom the incentive was extended has been placed on recordby the assessee and perused by the CIT (A). 12.Before us, the learned counsel for the revenue stated that the ITATwhile upholding the deletion of the said disallowance erred in relying on itsown order in the case of assessee for the AYs 2008-09 and 2009-10. Hestated that the said orders of the ITAT are under challenge before this Court.On merits of the claim, he stated that this is merely a provision and thereforecould not be allowed as an expense in the relevant assessment year. Hedisputed that the discount is extended to the advertisers in the same financialyear. He stated that ITAT was wrong in holding that it is an ascertainedliability. 13.Per contra, the learned senior counsel for assessee stated that theclaim of expenses on account of 'consumption incentive' is a discountoffered by the assessee to its advertisers in the same assessment year so thatthey book more advertisement space. He stated that in case of theconsumption incentive, the advertisers are given an offer that in case itconsumes a certain amount of allotted time during the given period ofbroadcasting, then it will be entitled to ‘consumption incentive’ i.e. discount ITA 227/2022 Page 4 of 21 on the total billing amount. In this regard, it was sought to be illustrated thatfor instance, if the advertiser consumes 1000 seconds during the givenperiod, then it will be entitled to 'consumption incentive' and offered a 20%discount on the total amount of billing. In this manner, after an eligibleadvertiser consumes 1000 seconds, the assessee extends 'consumptionincentive' of 20% of the total billing amount to such an advertiser andcredits the account of the advertiser in the same assessment year. 14.It is stated that the billing time space consumed by the advertisers isbooked as an income in the relevant assessment year and the ‘consumptionincentive’ extended to these advertisers is booked as expense of the saidassessment year, since it is set off from the total billing. In this regard, hedrew our attention to the response dated 13[th]February, 2015 filed by theassessee before the AO providing therein the detailed list of each advertiserto whom this discount has been passed-on with the break-up of the amountin the relevant assessment year. 15.It was thus, explained that when an invoice is raised on the advertiserfor the full amount, the said invoice is recorded in the books of accounts atthe full amount and it is only after the advertiser consumes the 1000seconds, the consumption incentive of 20% is credited to the advertiser'sledger account and the billed amount accordingly stands reduced. 15.It was thus, explained that when an invoice is raised on the advertiserfor the full amount, the said invoice is recorded in the books of accounts atthe full amount and it is only after the advertiser consumes the 1000seconds, the consumption incentive of 20% is credited to the advertiser'sledger account and the billed amount accordingly stands reduced. 16.With respect to the assessment year under consideration, therespondent submitted that the assessee has duly provided the detailed break-up of the advertisers to whom the consumption incentive of Rs. 33,481,847/-was duly passed-on. Therefore, he contended that assessee was entitled toclaim the same as a deduction since the billed amount accordingly stoodeffectively reduced. ITA 227/2022 Page 5 of 21 17.It was further submitted by the respondent that the said expenses havebeen duly allowed to the assessee for all assessment years. The respondenthas placed before us a chart to demonstrate that the said expenditure hasbeen claimed by the respondent in its Profit and Loss Account, since theassessment year 2004-05. Further, though scrutiny assessment was carried-out in each of the AYs, the said expense was duly allowed by the AO for theAYs 2004-05, 2005-06, 2006-07 and 2007-08. 18.The chart also shows that this expense was first disallowed by the AOin the AY 2008-09 followed by AYs 2009-10, 2010-11, 2011-12 and 2012-13. He however, submits that the disallowance made by the AO in each ofthe aforesaid four years has been deleted by the CIT(A) and said deletionhas been upheld by the ITAT. He states that as a matter of fact the incentivehas been duly passed on to the advertisers and income from billing wasreduced to this extent. 19.He further submits that applying the rule of consistency, even in theyear under consideration i.e. AY 2012-13, no error has been committedeither by the CIT(A) or by the ITAT in accepting the expenditure anddeleting the addition made by the AO.He states that in the grounds ofappeal, though, it has been averred at ground (f) by the appellant that theappeal on the issue of consumption debtors is pending before this court forassessment year 2008-09 and 2009-10, no advance paper-book has beenserved on him. 20.The counsel for the appellant, in reply states that it appears that theappeals for the AYs 2008-09 and 2009-10 though have been filed but thesame are in defects with the Registry and not numbered. Details of the saidappeals are not readily available with the counsel. ITA 227/2022 Page 6 of 21 21.As noted above, the CIT(A) after considering the documents placedon record by the assessee held that the liability of 'consumption incentive'was clearly ascertained and since assessee is following the mercantilesystem of accounting consistently, this ascertained liability should bepermitted to be deducted. The ITAT too has concurred with the said findingof the CIT (A). The learned senior counsel for the respondent has reiteratedhis submissions that the discount was in fact credited to the ledger accountof the advertisers in the same financial year; there is no spill-over andassessee is therefore entitled to claim deduction in the same financial year. 22.The Revenue's challenge that it is a provision for discounts and is notan ascertained liability debited to the account of the party is not borne out.As noted above, the details of the advertisers in whose account, the discountwas credited has been placed before the AO and accepted by the appellateauthorities. The Revenue has not placed on record any material to rebut theassertions of the assessee. 22.The Revenue's challenge that it is a provision for discounts and is notan ascertained liability debited to the account of the party is not borne out.As noted above, the details of the advertisers in whose account, the discountwas credited has been placed before the AO and accepted by the appellateauthorities. The Revenue has not placed on record any material to rebut theassertions of the assessee. 23.It is, therefore evident from the record that the aforesaid disallowancehas been deleted by the CIT(A) and ITAT, after considering the material onrecord and satisfying itself that it is an ascertained liability of the assesseewhich 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 thisexpense was consistently allowed since AY 2004-05 and allowed by the AOis also not in dispute. The “consistency” rule has been enunciated in M/sRadhasaomi Satsang, Saomi Bagh, Agra v. Commissioner of Income Tax,(1992) 2 SCC 659. The Supreme Court observed, in that case that: “…where a fundamental aspect permeating throughthe different assessment years has been found as a factthe different assessment years has been found as a fact ITA 227/2022Page 7 of 21 one way or the other and parties have allowed thatposition to be sustained by not challenging the order, itwould not be at all appropriate to allow the position tobe changed in a subsequent year. 19. On these reasonings in the absence of any materialchange justifying the Revenue to take a different viewof the matter- and if there was not change it was insupport of the assesses-we do not think the questionshould have been reopened and contrary to what hadbeen decided by the Commissioner of Income-Tax inthe earlier proceedings, a different and contradictorystand should have been taken.” 24.We therefore find no infirmity in the order passed by ITAT upholdingthedecisionofCIT(A)deletingthedisallowanceonaccountof‘consumption debtors’. Disallowance under Section 14A of the Act 25.During the scrutiny proceedings, the AO observed that the assesseehas made investments in its subsidiary and associate company and earnedexempt income of Rs. 2,34,585/- in the relevant assessment year. Theassessee had made a suo moto disallowance of Rs. 29,04,491/-. However,the AO proceeded to invoke the provision of Section 14A of the Act r/wRule 8D of the Income Tax Rules, 1962; computed a disallowance of Rs.38, 94, 755/- and made an addition of Rs. 9,90,264/-. The CIT (A) reversedthe said disallowance and deleted the addition on the ground that the AO hasfailed to record his satisfaction before invoking the provisions of Section 14A of the Act and relying upon the decisions of this Court. ITA 227/2022 26.The ITAT in the impugned order has upheld the finding of the CIT(A) after observing that it is a settled principle of law that disallowance u/s14A of the Act cannot be more than the exempt income and finding that AOhad mechanically invoked the provisions of Section 14A without recordingits satisfaction. 27.The learned counsel for the revenue has not disputed that the exemptincome earned by the assessee in this assessment year was Rs. 2,34,585/-and the assessee has already made a suo moto disallowance of a sum ofRs.29,04,491/- under Section 14 A in its computation. 28.As per the law settled by this court in the case of Cheminvest Ltd. vs.CIT) (2015) 61 taxmann.com 118 (Del.); and PCIT vs. IL & FS EnergyDevelopment Company Ltd. reported in 2017 SCC OnLine Del 9893, thedisallowance to be made under Section 14A cannot be in excess of theexempt income earned by the assessee. The counsel for the revenue hasplaced reliance on the CBDT circular 5/2014 to contend that disallowanceunder Section 14A would be attracted even if corresponding exempt incomeis not earned during the financial year. The said circular cannot be reliedupon since its contrary to the law laid down by this Court. 28.As per the law settled by this court in the case of Cheminvest Ltd. vs.CIT) (2015) 61 taxmann.com 118 (Del.); and PCIT vs. IL & FS EnergyDevelopment Company Ltd. reported in 2017 SCC OnLine Del 9893, thedisallowance to be made under Section 14A cannot be in excess of theexempt income earned by the assessee. The counsel for the revenue hasplaced reliance on the CBDT circular 5/2014 to contend that disallowanceunder Section 14A would be attracted even if corresponding exempt incomeis not earned during the financial year. The said circular cannot be reliedupon since its contrary to the law laid down by this Court. 29.Further, there is no challenge to the finding of the CIT (A) and theITAT that AO failed to record satisfaction before invoking the provisions ofSection 14A of the Act, which is the condition precedent for making theaddition.In this view of the matter the additional disallowance ofRs.9,09,264/- made by the AO is impermissible and contrary to law. TheITAT was correct in upholding the order of the CIT(A) deleting thedisallowance of Rs.9,09,264/-. Disallowance u/s 36(1)(va) of the Act on account of late deposit of ITA 227/2022Page 9 of 21 employee's contribution to PF 30.With respect to the disallowance of Rs. 43,14,198/- made by AOunder Section 36(1)(va) of the Act, on the ground that the employeescontribution for the month of March 2012 was deposited by assessee on25.04.2012 as against the 'due date' of 20.04.2012 under the Labour statute.The CIT (A) deleted the said disallowance holding that the 'due date' is to bedetermined as the date of filing the return of income under Section 139 (1)of the Act. In arriving at the said finding the CIT (A) followed thejudgments of this Court in CIT Vs. AIMIL Ltd. (2010) 321 ITR 508(Delhi). 31.The ITAT in the impugned order has noted that there is no disputethat the employees contribution of PF was paid before filing the return ofincome and therefore held that the CIT (A) has rightly deleted thedisallowance made by the AO in consonance with the law laid down. 32.Learned counsel for the revenue submits that the ITAT fell in error byplacing reliance on the judgment of this court in AIMIL Ltd. (supra),wherein it was held that if the deposit of employees contribution towardsprovident fund is made by the assessee before the due date of filing itsreturn, no such disallowance can be made under Section 36(1)(va) of theAct. In this regard he states that this court in AIMIL Ltd. (supra), decidedthe issue in favour of the assessee relying upon the judgment of the Supremecourt in Commissioner of Income Tax vs. Vinay Cement Ltd. 213 ITR 268(SC), which order of the Supreme Court relates to delay in deposit ofcontribution made by the employer under Section 43B of the Act. He statesthat in the case of Vinay Cement (supra), the Supreme Court was not ITA 227/2022 Page 10 of 21 concernedwith theassessee'sdelay indepositofthe employee’scontribution and therefore Section 36(1)(va) of the Act was not underconsideration. He states that there is a material distinction between the twoprovisions in as much as Section 36 (1)(va) of the Act deals with assessee'sdefault in deposit of employee contribution and Section 43B deals withassessee's default in deposit of employer's contribution. 33.Per contra, learned counsel for the respondent states that challenge tothe dicta of AIMIL Ltd. (supra) by the learned counsel for the revenue isincorrect and this issue is no more res integra, inasmuch as, the case of CITvs. SPL Industries Limited in ITA No. 749/2010, in which one of us(Justice Manmohan) was a member, this Court, after taking note of similarsubmissions made by learned Standing Counsel for revenue rejected thesame and concluded that the law laid down in AIMIL Ltd.(supra) is correctand there is no justification to differ with the same. 33.Per contra, learned counsel for the respondent states that challenge tothe dicta of AIMIL Ltd. (supra) by the learned counsel for the revenue isincorrect and this issue is no more res integra, inasmuch as, the case of CITvs. SPL Industries Limited in ITA No. 749/2010, in which one of us(Justice Manmohan) was a member, this Court, after taking note of similarsubmissions made by learned Standing Counsel for revenue rejected thesame and concluded that the law laid down in AIMIL Ltd.(supra) is correctand there is no justification to differ with the same. 34.In fact, in CIT vs. SPL Industries Limited (supra) the court took noteof another judgment of this court in CIT vs. P.M. Electronics Ltd. reportedin 313 ITR 161 (Del.) on the same proposition.This court in ITA No.794/2010 in its order dated 7[th]July, 2010 in CIT vs. SPL Industries Ltd. hasheld as under : “5. Ms. Suruchi Aggarwal, learned counsel for therevenue submitted that the tribunal has fallen intoerror by placing reliance on the decision rendered inCIT vs. P.M. Electronics Ltd., 313 ITR 161 (Del.)wherein it has held that if the payments are madebefore the due date of filing the return, no suchdisallowance can be made under Section 43B of theAct is not applicable to the case at hand inasmuch asthe said decision had placed reliance on the decision ofthe Apex Court in the case of CIT vs. Vinay Cementrevenue submitted that the tribunal has fallen intoerror by placing reliance on the decision rendered inCIT vs. P.M. Electronics Ltd., 313 ITR 161 (Del.)wherein it has held that if the payments are madebefore the due date of filing the return, no suchdisallowance can be made under Section 43B of theAct is not applicable to the case at hand inasmuch asthe said decision had placed reliance on the decision ofthe Apex Court in the case of CIT vs. Vinay Cement ITA 227/2022 =Ltd., 2007 (213) CTR 268 2009 (313) ITR (SC)which only relates to the contribution made by theemployer and would not cover the contribution madeby the employees. In this context, we may profitablyreferred to the decision in Commissioner of IncomeTax vs. AIMIL Limited in ITA No. 1063/2008 wherebya Division Bench of this Court was dealing with theissue whether the tribunal was correct in law deletingtheadditionrelatingtoemployees’contributiontowards the Provident Fund and the Employees StateInsurance contribution made by the assessing officerunder Section 36(1)(va) of the Act. The Division Bench,as is evident from the order, referred to the clause (v)-of subsection (1) of Section 36 and thereafter to clause(va) of the same and scanned the anatomy of 43B andreferred to the decision in Vinay Cement Ltd. (supra)andrelied on the decision in P.M.ElectronicsLtd.(supra) wherein the substantial questions of lawwere framed, inter alia, whether the amounts paid onaccount of PF/ESI after due date are allowable in viewof Section 43B read with Section 36(1)(va) of the Actand proceeded to hold as follows: “We may only add that if the employees’contribution is not deposited by the due dateprescribed under the relevant Acts and isdeposited late, the employer not only paysinterest on delayedpaymentbutcanincurpenaltiesalso,forwhichspecificprovisions are made in the Provident FundAct as well as the ESI Act.Therefore, the Act permits the employer tomake the deposit with some delays, subject tothe aforesaid consequences. Insofar as theIncome Tax Act is concerned,theassesseecan get the benefit if the actual payment ismade before the return is filed, as per theprinciples laid down by the Supreme Court inVinay Cement (supra).” ITA 227/2022 6. Be it noted, the decision rendered by the GauhatiHigh Court was assailed before the Apex Court inVinay Cement Ltd. (supra). In the said case, theirLordships have held thus: “We may only add that if the employees’contribution is not deposited by the due dateprescribed under the relevant Acts and isdeposited late, the employer not only paysinterest on delayedpaymentbutcanincurpenaltiesalso,forwhichspecificprovisions are made in the Provident FundAct as well as the ESI Act.Therefore, the Act permits the employer tomake the deposit with some delays, subject tothe aforesaid consequences. Insofar as theIncome Tax Act is concerned,theassesseecan get the benefit if the actual payment ismade before the return is filed, as per theprinciples laid down by the Supreme Court inVinay Cement (supra).” ITA 227/2022 6. Be it noted, the decision rendered by the GauhatiHigh Court was assailed before the Apex Court inVinay Cement Ltd. (supra). In the said case, theirLordships have held thus: “In the present case we are concernedwith the law as it stood prior to theamendmentofSection43B.Inthecircumstances the assessee was entitled toclaim the benefit in Section 43B for thatperiod particularly in view of the fact that hehas contributed to provident fund beforefiling of the return. The special leave petitionis dismissed.” 7. It is apt to note that the Division Bench has takennote of the submission advanced by the revenue thatthe distinction between employers‟ contribution on the one hand and the employees’ contribution on the other.On the foundation that when employees’ contributionwas recovered from their salaries / wages that is thetrust money in the hands of the assessee and, therefore,recourse of law providing for treating the same asincome that the assessee received as the employees’contribution would only enable the assessee to claimdeduction only on actual payment made by due datespecified under the provisions of the Act. The Benchwhile dealing with the same has opined thus: “11.Beforewedelveintothisdiscussion, we maytake note of somemore provisions of the Act.Section 2(24)of the Act enumerates different componentsof income. It, inter alia, stipulates thatincome includes any sum received by theassessee from his employees as contributionsto any provident fund or superannuationfund or any fund set up under the provisionsof the Employees’ State Insurance Act, 1948 ITA 227/2022 (34 of 1948), or any other fund for thewelfare of such employees. It is clear fromtheabovethatassoonasemployeescontribution towards provident fund or ESIis received by the assessee by way ofdeduction or otherwise from the salary /wages of the employees, it will be treated as‘income’ at the hands of the assessee. Itclearly follows therefrom that if the assesseedoesnotdepositthiscontributionwithprovident fund/ESI authorities, it will betaxed as income at the hands of the assessee.However,onmakingdepositwiththeconcerned authorities, the assessee becomesentitled to deduction under the provisions ofSection 36(1)(va) of the Act. Section 43B(b),however,stipulatesthatsuchdeductionwouldbepermissibleonlyonactualpayment. This is the scheme of the Act formaking an assessee entitled to get deductionfromincomeinsofarasemployees’contribution is concerned. It is in thisbackdrop we have to determine as to at whatpoint of time this payment is to be actuallymade.” 8. Upon perusal of the aforesaid, we are of theconsidered opinion that the decisions rendered in P.M.Electronics Ltd.(supra) and AIMIL Limited (supra)have correctly laid down the law and there is nojustification or reason to differ with the same. In theresult, we do not perceive any merit in this appeal andaccordingly the same stands dismissed. (Emphasissupplied) 35.Learned counsel for assessee has also drawn out attention to the order dated 10[th]September, 2018 passed in ITA No. 983/2018 in the case of PR. Commissioner of Income Tax-7 vs. PRO Interactive Service (India) Pvt. ITA 227/2022 Page 14 of 21 Ltd., wherein this Court after taking note of the judgment in AIMILLtd.(supra) has settled this issue conclusively against the revenue held asunder : 8. Upon perusal of the aforesaid, we are of theconsidered opinion that the decisions rendered in P.M.Electronics Ltd.(supra) and AIMIL Limited (supra)have correctly laid down the law and there is nojustification or reason to differ with the same. In theresult, we do not perceive any merit in this appeal andaccordingly the same stands dismissed. (Emphasissupplied) 35.Learned counsel for assessee has also drawn out attention to the order dated 10[th]September, 2018 passed in ITA No. 983/2018 in the case of PR. Commissioner of Income Tax-7 vs. PRO Interactive Service (India) Pvt. ITA 227/2022 Page 14 of 21 Ltd., wherein this Court after taking note of the judgment in AIMILLtd.(supra) has settled this issue conclusively against the revenue held asunder : “In view of the judgment of the Division Bench of theDelhi High Court in Commissioner of Income-Tax v.AIMIL Limited, (2010) 321 ITR 508 (DEL) the issue iscoveredagainsttheRevenueand,therefore,nosubstantial question of law arises for consideration inthis appeal. ...The legislative intent was/is to ensure that theamount paid is allowed as an expenditure only whenpayment is actually made. We do not think that thelegislative intent and objective is to treat belatedpayment of Employee's Provident Fund (EPD) andEmployee's State Insurance Scheme (ESI) as deemedincome of the employer under Section 2(24)(x) of theAct...” 36.In this regard it would be relevant to note that the Division Bench ofthis Court in AIMIL Ltd.(supra) at paragraph 2, duly deliberated over theissue of delay by assessee in deposit of employee contribution in the contextof section 36(1)(va) of the Act and concluded that if the amount is depositedby the assessee before the due date for filing the return, it shall be entitled tothe disallowance. In this regard the relevant paragraphs of the judgement areas follows: “2. The case relates to the assessment year 2002–03.Therespondent-assesseehadfileditsreturnonOctober 30, 2002, declaring income at Rs. 7,95,430.During the assessment proceedings, the AssessingOfficer (AO) found that the assessee had deposited theemployers' contribution as well as the employees'contribution towards provident fund and ESI after thedue date, as prescribed under the relevant Acts/Rules. ITA 227/2022 Page 15 of 21 Accordingly, he made addition of Rs. 42,58,574 beingthe employees' contribution under section 36(1)(va) ofthe Act and Rs. 30,68,583 being the employers'contribution under section 43B of the Act. Feltaggrieved by this assessment order, the assesseepreferred appeal before the Commissioner of Income-tax (Appeals) who decided the same vide orders datedJuly 15, 2005. Though the Commissioner of Income-tax(Appeals) accepted the contention of the assessee thatif the payment is made before the due date of filing ofreturn, no disallowance could be made in view of theprovisions of section 43B, as amended vide FinanceAct, 2003, he still confirmed the addition made by theAssessing Officer on the ground that no documentaryproof was given to support that payment was in factmade by the assessee. The assessee filed an applicationunder section 154 of the Act before the Commissionerof Incometax (Appeals) for rectification of the mistake.After having satisfied that payment had, in fact, beenmade, the Commissioner of Income-tax (Appeals)rectified the mistake and deleted the addition byholding that the assessee had made the payment beforethe due date of filing of the return, which was a factapparent from the record. It was now the turn of theRevenue to feel agitated by these orders and, therefore,the Revenue approached the Income-tax AppellateTribunal(ITAT)challengingtheordersoftheCommissionerofIncome-tax(Appeals).TheDepartment has, however, remained unsuccessful asthe appeal preferred by the Department is dismissed bythe Income-tax Appellate Tribunal vide its impugneddecision dated December 31, 2007, which is thesubject-matter of appeal before us. 17. It also becomes clear that deletion of the secondproviso is treated as retrospective in nature and wouldnot apply at all. The case is to be governed with theapplication of the first proviso. We may only add that ifthe employees' contribution is not deposited by the due ITA 227/2022 date prescribed underthe relevant Acts and isdeposited late, the employer not only pays interest ondelayed payment but can incur penalties also, forwhich specific provisions are made in the ProvidentFund Act as well as the ESI Act. Therefore, the Actpermits the employer to make the deposit with somedelays, subject to the aforesaid consequences. In so faras the Income-tax Act is concerned, the assessee canget the benefit if the actual payment is made before thereturn is filed, as per the principle laid down by theSupreme Court in Vinay Cement, [2009] 313 ITR (St.)1.” 37.It is therefore evident that the enunciation of law by this court on theissue of 'due date' in case of delay by the assessee in depositing theemployee contribution under section 36(1)(va) of the Act is to be reckonedas the date for filing the return under Section 139 (1) of the Act and not thedue date of the relevant Labour statute. This law has been settled by thisCourt in CIT vs. P.M. Electronics Ltd (supra), AIMIL Ltd. (supra), CIT vs.SPL Industries Ltd and PR. Commissioner of Income Tax-7 vs. PROInteractive Service (India) Pvt. Ltd. (supra) and consistently followedthereafter. 38.The learned counsel for the respondent has further relied upon thenewly inserted 'Explanation 2' to Section 36(1)(va) of the Act and'Explanation 5' to Section 43B of the Act, by the Finance Act, 2021 w.e.f. 1[st]April, 2021, to contend that the legislature has since clarified the provisionand consequently, the judgements relied upon by the authorities belowincluding AIMIL Ltd. (supra) are no more good law. The amendment toSection 36(1) (va) of the Act and Section 43B of the Act is reproducedherein below: [Explanation 2.- For the removal of doubts, it is hereby ITA 227/2022 Page 17 of 21 clarified that the provisions of section 43B shall notapply and shall be deemed never to have been appliedfor the purposes of determining the “due date” underthis clause;] (Emphasis supplied) [Explanation5.—For the removal of doubts, it ishereby clarified that the provisions of this section shallnot apply and shall be deemed never to have beenapplied to a sum received by the assessee from any ofhis employees to which the provisions of sub-clause (x)of clause (24) of section 2 applies.] (Emphasissupplied) 39.He contends that with the insertion of this explanation there can be nodoubt that 'due date' for the purpose of deposit under Section 36(1)(va) ofthe Act is to be the 'due date' on which the employee contribution wasrequired to be deposited under the relevant statute and the 'due date' referredto under Section 43B of the Act would have no application. Thus, thedeposit made by assessee on 25.04.2012 has been correctly disallowed bythe AO. 40.The said contention is noted to be rejected since it is contrary to theplain text of the Memorandum of the Finance Bill, 2021 proposing the saidamendment. The relevant extract of Clauses 8 and 9 of the Memorandum ofthe Finance Bill 2021 explaining the proposed insertion reads as under : “Though section 43B of the Act covers only employer’scontribution and does not cover employee contribution,some courts have applied the provision of section 43Bon employee contribution as well.There is a distinctionbetweenemployercontributionandemployee’scontribution towards welfare fund. It may be noted thatemployee’s contribution towards welfare funds is a ITA 227/2022 40.The said contention is noted to be rejected since it is contrary to theplain text of the Memorandum of the Finance Bill, 2021 proposing the saidamendment. The relevant extract of Clauses 8 and 9 of the Memorandum ofthe Finance Bill 2021 explaining the proposed insertion reads as under : “Though section 43B of the Act covers only employer’scontribution and does not cover employee contribution,some courts have applied the provision of section 43Bon employee contribution as well.There is a distinctionbetweenemployercontributionandemployee’scontribution towards welfare fund. It may be noted thatemployee’s contribution towards welfare funds is a ITA 227/2022 mechanism to ensure the compliance by the employersof the labour welfare laws. Hence, it needs to bestressed that the employer‘s contribution towardswelfare funds such as ESI and PF needs to be clearlydistinguishedfromtheemployee’scontributiontowards welfare funds. Employee’s contribution isemployee own money and the employer deposits thiscontribution on behalf of the employee in fiduciarycapacity. By late deposit of employee contribution, theemployers get unjustly enriched by keeping the moneybelonging to the employees. Clause (va) of sub-section(1) of Section 36 of the Act was inserted to the Act videFinance Act1987 as a measures ofpenalizingemployers who mis-utilize employee‘s contributions.Accordingly, in order to provide certainty, it isproposed to – (i)amend clause (va) of sub-section (1) of section 36 ofthe Act by inserting another explanation to the saidclause to clarify that the provision of section 43B doesnot apply and deemed to never have been applied forthe purposes of determining the “due date” under thisclause; andthe Act by inserting another explanation to the saidclause to clarify that the provision of section 43B doesnot apply and deemed to never have been applied forthe purposes of determining the “due date” under thisclause; and (ii)amendsection43BoftheActbyinsertingExplanation 5 to the said section to clarify that theprovisions of the said section do not apply and deemedto never have been applied to a sum received by theassessee from any of his employees to which provisionsof sub-clause (x) of clause (24) of section 2 applies.Explanation 5 to the said section to clarify that theprovisions of the said section do not apply and deemedto never have been applied to a sum received by theassessee from any of his employees to which provisionsof sub-clause (x) of clause (24) of section 2 applies. These amendments will take effect from 1[st]April,2021 and will accordingly apply to the assessment”-year 202122 and subsequent assessment years.(Emphasis supplied) 41.The Memorandum acknowledges that courts have taken a view thatthe 'due date' to be considered for the purposes of Section 36(1)(va) of theAct is under Section 43B and it is in that background that the Explanation ITA 227/2022 has been inserted to alter this position. Further, the Memorandum explicitlystipulates that the said amendment will take effect from 1[st]April 2021 and itcannotthereforecannotapplytoassessmentyear2012-13underconsideration. The legislature is therefore conscious that the Explanationseeks to change the law as it stands on date and is therefore intended toapply to subsequent assessment years. The contention of the revenuetherefore that the said amendment is retrospective cannot be accepted. 41.The Memorandum acknowledges that courts have taken a view thatthe 'due date' to be considered for the purposes of Section 36(1)(va) of theAct is under Section 43B and it is in that background that the Explanation ITA 227/2022 has been inserted to alter this position. Further, the Memorandum explicitlystipulates that the said amendment will take effect from 1[st]April 2021 and itcannotthereforecannotapplytoassessmentyear2012-13underconsideration. The legislature is therefore conscious that the Explanationseeks to change the law as it stands on date and is therefore intended toapply to subsequent assessment years. The contention of the revenuetherefore that the said amendment is retrospective cannot be accepted. 42.The Supreme court in Sedco Forex International Drill. Inc. Vs. CITreported in (2005) 12 SCC 717 andM.M.Aqua Technologies Ltd. vs.Commissioner of Income Tax, Delhi-III reported in 2021 SCC OnLine SC575 has held that a provision in a Tax Act which is “for the removal ofdoubts” cannot be presumed to be retrospective, even where such languageis used, if it alters or changes the law as it earlier stood. The Supreme Courtfurther held that a cardinal principal of tax law is that for the law to beapplied it has to be in force during the relevant assessment years unlessotherwise provided expressly or by necessary implication. In that view itwas held by the Supreme Court that the amendment was not retrospective. 43.As noted above, this court has as early as in the case of AIMIL Ltd.(supra) dated 23[rd]December, 2009 held that the due date for the purpose ofSection 36 (1) (va) of the Act would be the due date as provided underSection 43B of the Act and not the relevant Labour statute. This law asnoted above has held the field till date, followed by this Court consistentlyand the appellate authorities below have determined the matter inaccordance with the said law. 44.Consequently, this Court is of the view that the amendment to Section36(1)(va), which is 'for removal of doubts', cannot be presumed to be ITA 227/2022 Page 20 of 21 retrospective even where such language is used, if it alters or changes thelaw as it earlier stood. 45.It is also noted that in the facts of the case, the due date for depositingthe Employees’ contribution to the Provident Fund was 20[th]April, 2012 andthe assessee had deposited the same on 25[th]April, 2012. There is no disputethat the amount stands deposited before the filing of the return. We,therefore, find that there is no ground for taking a view different from theview consistently held by this court since AIMIL Ltd.(supra). 46.In view of the aforesaid, we find that no substantial question of lawarises in this matter and there is no infirmity in the impugned order dated29[th]July, 2021 passed by the ITAT in the ITA No. 5204/DEL/2017 for theassessment year 2012-13 and accordingly, the present appeal is dismissed. MANMEET PRITAM SINGH ARORA, J JULY 27, 2022j MANMOHAN, J ITA 227/2022