TMI Blog2021 (1) TMI 321X X X X Extracts X X X X X X X X Extracts X X X X ..... )(ia) on account of non-deduction of tax at source - AR submitted that the learned CIT(A) ought to have appreciated that that the payments made by the assessee towards purchase of software is not covered within the meaning of royalty / royalties under the applicable DTAA and hence, the Appellant was not under the obligation to withhold taxes - HELD THAT:- We are of the opinion that the assessee cannot foresee the changes in the Act which was made wherein Expln. 5 to Section 9(1)(vi) of the Act was inserted vide Finance Act, 2012 w.e.f. 1.6.2016 since these payments are made prior to this amendment. Being so, following the Tribunal order in the case of Acer India Pvt. Ltd. [ 2020 (10) TMI 450 - ITAT BANGALORE] we allow the above ground taken by the assessee. Deduction of education cess and secondary higher education cess - assessee submitted that the assessee out of abundant caution had not claimed the said deduction in the return of income for the year under consideration in the absence of clarity in respect of the said issue - HELD THAT:- As relying on VOLTAS LIMITED [ 2020 (7) TMI 125 - ITAT MUMBAI] deducation Cess and the Secondary and Higher Education Cess is not di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt in the companies and the supervisory authority records such appraisal of the employees reporting to him. In absence of details provided by the assessee, the CIT(A) was of the view that it is not possible to determine as to whether all these 556 employees are working in supervisory capacity or not. The CIT(A) was of the view that the onus was on the assessee to show that these employees were not working in any supervisory capacity, however the assessee had failed to discharge this onus. Therefore, according to the CIT(A), these employees cannot be considered to be satisfying the condition of being considered as workmen. In view of above also, the entire claim of the assessee needs to be rejected. 3.1 In addition to above, the CIT(A) noticed that as per Form No.10DA the assessee had claimed deduction u/s 80JJAA of the Act in relation to new regular workmen employed during FY 2007-08 and in relation to which deduction u/s 80JJAA of the Act was claimed for first time during A Y 2008-09. Before the CIT(A), the assessee had claimed that it is eligible for the third installment of such deduction @30% on an amount of ₹ 26,39,22,189/- being the wages paid to these workers. Here, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be claimed. In the case under consideration, the CIT(A) observed that of these 66 employees, 50 had resigned on or before 25.01.2010, as such these employees did not complete period of 300 days in the employment and hence, the salary of ₹ 1,91,25,302/- paid to these employees cannot be considered for the purpose of computation of deduction under Section 80JJAA of the Act. 3.3 As regards the eligibility of deduction @30% on the balance amount of ₹ 24,79,73,475/- for A Y 2008-09 (3rd claim) and ₹ 35,79,14,149/- for A Y 2009-10 (2nd Claim), the CIT(A) felt that the issue could have been decided on the basis of information regarding the employees i.e. whether they are working in the supervisory capacity or not. However, according to the CIT(A), the assessee has not produced the requisite details to ascertain this aspect. Since the assessee failed to discharge the onus that these employees were not working in supervisory capacity during the initial year as well as during the year under consideration, the CIT(A) denied the benefit of deduction in relation to above amounts to the assessee. 3.4 The CIT(A) observed that salary paid to a worker who is not employed f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e subsequent year as in the initial year it was not considered as new workman and in the subsequent year it is not a new workman, as already employed as on the first day of such year. Since in the case under consideration the assessee had admitted that it is taking into consideration such employees, who were not employed for a period of 300 days in the initial year, for purpose of deduction under Section 80JJAA of the Act, the CIT(A) held that deduction in relation to such employees employed in FY 2007-08 and FY 2008-09 was wrongly claimed in A Y 2008-09 and A Y 2009-10 and hence, the 3rd and 2nd claim in relation to these earlier deductions for A Y 2008-09 and A Y 2009-10 in relation to such employees needs to be rejected. 3.6 Further, the CIT(A) noticed that one of the reason for the claim of the assessee having failed for the year under consideration is that after excluding workman employed for less than 300 days, the number of remaining new workmen employed during the year fell below the limit of 10% of the workmen as on the last day of the previous year and the same could be the situation in relation to A Y 2008-09 and A Y 2009-10. Therefore, the CIT(A) held that the 3rd an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... increase of 21.34 per cent as against 10 per cent required under the law. The condition that the increase in number of regular workmen during the year should not be less than 10 per cent of the existing workmen stood satisfied. Once this condition was satisfied, the assessee was eligible for deduction of 30 per cent additional wages in respect of 63 workmen, who were employed for a period of more than 300 days during the year. Therefore, the assessee was entitled for deduction to the tune of ₹ 7,69,770. As regards the balance amount of additional wages paid at ₹ 45,05,403, the regular workmen as on 31-3-2002 were 1653, which increased to 1926 as on 31-3-2003 giving an increase of regular workmen at 273 [16.52 per cent). Since the condition of increase in regular workmen not less than 10 per cent was satisfied, the assessee was eligible for deduction under section 80JJAA of the Act at the rate of 30 per cent of additional wages paid to 236 new regular workmen employed for a period of 300 days or more during the relevant previous year. 4. The ld. CIT (Appeals) in respect of wages paid to new regular workmen employed in the previous year relevant to assessment year 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e regular workmen has been defined in clause (ii) of the Explanation which does not mean a casual workman or a workman employed through contract labour or any other workman employed for a period of less than 300 days during the previous year. He further submits that the interpretation of words 'new regular workmen' in excess of 100 workmen employed during the previous year adopted by CIT(A) is incorrect in the sense that the deduction will be available only if regular workmen employed during the year for more than 300 days exceeds 100. These words are to be interpreted with reference to the other condition for allowability of deduction that the regular workmen employed should not be less than 10 per cent of workmen employed as on the last day of the preceding year. In view of above it has been pleaded that the ld. CIT (Appeals) has not correctly appreciated the provisions of law. Since assessee has employed regular new workmen as provided under law, the assessee is entitled for deduction of ₹ 19,29,662 in respect of such workmen. However, in respect of disallowance of ₹ 7,69,770 the Id. AR of the assessee fairly conceded that the assessee is not entitled for ded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing in categories (a) and (b). From above one can find that regular workmen are those who come under category (d) whereas the employees under categories (b), (c) and (d) are workmen . in other words employees of categories (b) and (c) are 'workmen' but they are not regular 'workmen , Clause (i) of the Explanation defines the expression additional wages which means the wages paid to the new regular workmen in excess of one hundred workmen employed during the previous year. The Legislature has employed words in excess of one hundred workmen employed in clause (i) of the Explanation. Therefore, all employees falling in categories (b), (c) and (d) taken together 'will constitute workmen employed in an industrial undertaking. Thus for becoming eligible for deduction under section 80JJAA in case of a new industrial undertaking there should be minimum 100 workmen employed during the previous year. The additional wages should be paid to the new regular workman in excess of one hundred workmen so employed during the previous year. Proviso to clause (i) of the Explanation carves out an exception that in the case of an existing undertaking the additional wages s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) we find that in this case, the increase in the number of regular workmen has been determined with reference to regular workmen and not with reference to workmen employed in the undertaking as on the last day of the preceding year. For computation of deduction in respect of regular workmen employed for 300 days or more in previous year 2002-03 relevant to assessment year 2003-04, the Assessing Officer has not computed deduction with reference to new regular workmen in ex in excess of 100 workmen employed during the year. For this purpose as discussed above the percentage increase in the number of regular workmen has to be determined with reference to workmen employed in the undertaking as on the last day of the preceding year. This has also not been done. We, therefore, set aside the mailer to the file of the Assessing Officer with the directions to compute deduction under section 80JJAA of the Act discussed as above. 10. We may like to clarify that in a case if the assessee fulfils both the conditions that workmen employed during the year were 100 and percentage increase of regular workmen as compared to last day of preceding year is not less than 10 per cent, the assessee w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e previous year but not coming in categories (a) and (b). d. Other workman if employed for 300 days or more during the previous year but not coming in categories (a) and (b). Here, according to the CIT(A), the category (a) is as follows: a. Employees employed in managerial or administrative, capacity. It also includes employees employed in supervisory capacity and drawing salary exceeding ₹ 1,600 per month. 3.9 The CIT(A) relied on the decision of the jurisdictional ITAT in the case of Texas Instruments (India) (P.) Ltd. v. Deputy Commissioner of Income-tax, LTU, Bangalore[2017 (l82 taxman 264). Therefore, the CIT(A) held that the claim of the assessee regarding percentage increase in regular workmen could have been considered by applying this method only. 3.9.1 On perusal of Form No 10DA for claiming deduction tender Section 80JJAA of the Act, the CIT(A) found that it carries following note: 8) A position has been taken that the benefit is available for new regular workmen' employed in the year and the reference to 'in excess of 100 'workmen employed' in the definition of 'additional wages' under Explanation, only provides a thresho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the additional employees should be in excess of 10% of the workforce as on the last day of the immediately preceding previous year. The term regular workman does not include casual workman, workman employed through contract labour or any other workman employed for a period of less than three hundred days during the previous year. An audit report in the prescribed format giving details of the deduction should be enclosed along with the return of income 4.1 The Ld. AR submitted that the term regular workman is defined in a negative manner under section 80JJAA of the Act. The Act provides that the following categories or classes of employees are said not to constitute regular workman : a casual workman; a workman employed through contract labour; or any other workman employed for a period of less than 300 days during the previous year. In this regard, the Ld. AR submitted that the assessee had claimed deduction under section 80JJAA of the Act even for those workman who have been employed for less than 300 days in the previous year on the understanding that section 80JJAA of the Act is a beneficial section for advancement of employment in the industries ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... continuing in the service and having completed more than 300 days of employment, they may not complete 300 days during the previous year because of joining the employment after the month of June of the previous year. According to the Ld. AR, if the condition for 300 days is understood and applied in the technical manner then the very purpose and object of this scheme of generating more employment by the industry would be defeated. The condition of 300 days completed during the previous year cannot be applied in case when a new workmen is employed on regular basis and in continuous employment of more than 300 days. According to the Ld. AR, denying the deduction to workmen employed after 4th June would defeat the very purpose and object of the incentive provided under section 80JJAA. 4.5 Further, the ld. AR referred to clause (c) of explanation to section 80JJAA which defines regular workmen as requiring persons to be employed for a period of 300 days in all and not necessarily 300 days in the previous year as it would defeat the very object of the incentive intended to be granted by its provision. In this regard, the Ld. AR drew our attention to the Memorandum explaining the prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... workmen employed subsequent to June 4 should not be considered as Regular Workmen since they would not be able to satisfy the 300 day criterion, even though the workmen might continue to be employed with the Company even after March 31 of the subject previous year. According to the Ld. AR, such interpretation would effectively result into permanent loss of the deduction in respect of wages paid to workmen employed subsequent to June 4 of any financial year and continuing on the payroll of the company, since for the first year of employment, they would not be able to meet the 300 day criterion and for the subsequent years, they would not meet the condition of being newly employed in such subsequent years. Given the above evident disconnect and relying on the intent behind introduction of the provisions of section 80JJAA of the Act, being an incentive to promote employment of workmen, the Ld. AR submitted that the criteria that employee has to be employed for a minimum period of 300 days would be against the intent of the law. Hence, it was urged that such beneficial provision has to be interpreted liberally. In this regard, the Ld. AR placed reliance on the judgment of the Hon ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regular workmen employed during the year should be increased to at least 474. However, according to the Ld. DR, as against this, number of such regular workmen employed during the year under consideration is only 56, even if it is considered for the time being the same was not employed in any supervisory capacity. Therefore, considering above, the Ld. DR submitted that the assessee does not satisfy the condition laid down in above said proviso to Section 80JJAA of the Act and hence, the assessee is not eligible for any deduction u/s 80JJAA of the Act in relation to employment provided by it during the year under consideration. Further, the Ld. DR submitted that the balance claim of the assessee in relation to employment provided to 56 employees also needs to be rejected. The Ld. DR submitted that the salary paid to these employees during the year under consideration works out to ₹ 2,70,94,148/- and the assessee had claimed 30% deduction on the same, which works out to ₹ 81,28,244/-. Therefore, the Ld. DR submitted that the claim of the assessee to this extent is found to be excessive and the same needs to be disallowed. Considering above, the entire claim of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iew on this issue as taken in the A.Y. 2008-09. This ground of appeal is allowed for statistical purposes. 7. The next ground is with regard to disallowance of Annual Maintenance Contract and software expenses. 8. Regarding this issue, the learned Authorised Representative submitted that the learned CIT(A) has erred, in law and in facts, in disallowing Annual Maintenance Contract ( AMC ) expenses of ₹ 3,24,89,688/- under section 40(a)(i)/ 40(a)(ia) of the Act on account of non-deduction of tax at source. The ld. AR further submitted that the learned CIT(A) has erred, in law and in facts, in not granting the benefit of second proviso to section 40(a)(ia) read with first proviso to section 201(1) of the Act with respect to ₹ 1,67,40,236/- in relation to AMC expenses where the vendors have filed their tax returns in India. The ld. AR submitted that the learned CIT(A) has erred, in law and in facts, in concluding that software purchases to the extent of ₹ 5,18,62,176/- whose shelf life is more than 2 years should be treated as capital in nature. It was submitted by the ld. AR that the learned CIT(A) ought to have appreciated that such software are not perpetual ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. DR submitted that the issue of retrospective applicability of the second proviso to Section 40(a)(ia) of the Act becomes academic in nature and the same does not require any adjudication. Regarding software expenses, the ld. DR relied on the judgment of the Hon'ble Karnataka High Court in the case of CIT Vs. Samsung Electronics Ltd. 203 taxmann 477 (Kar) and submitted that similar issue was decided against the assessee and the same to be followed. 10. We have heard the rival contentions, perused and carefully considered the material on record. This issue was considered by the co-ordinate bench of this Tribunal in the case of Acer India Pvt. Ltd. Vs. JCIT dt.5.10.2020 in IT (IT) A No.107 to 114/Bang/2018 wherein it was held in paras 6 7, it was held as under : 6. In the case of M/s Teekays Interior Solutions Pvt Ltd (supra), the co-ordinate has considered the issue of making disallowance u/s 40(a)(ia) of the Act on the basis of subsequent decision rendered by Hon ble Karnataka High Court in the case of Samsung Electronics Co Ltd (supra). The decision rendered by the co-ordinate bench is extracted below:- 9. The next issue contested by the assessee relates t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned DR and perused the record. We noticed that an identical issue was considered by the coordinate bench in the case of Allegis Services India Pvt. Ltd. (supra) and identical disallowance made was deleted by the coordinate bench on the reasoning that the TDS liability cannot be fastened upon the assessee retrospectively. For the sake of convenience, we extract below the operating portion of the order passed by the co-ordinate bench:- 4. Ground Nos.2 to 5 are regarding disallowance under Section 40(a)(ia) of the Income Tax Act, 1961 (in short 'the Act') of payment towards software licenses treated by the Assessing Officer as royalty for want of TDS. The assessee has also raised additional grounds which are as under : Corporate tax matters 21. Without prejudice to the grounds 2 to 4, the Learned CIT(A) has failed to appreciate that during the Financial Year 2008-09 relevant to the Assessment Year 2009-10, the Appellant was not liable to withhold tax on the payments made as there was no provision under the Act mandating the deduction of tax at source on the payments made on purchase of computer software and there were many favorable judicial precedence in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law but it is only a declaration and interpretation of existing law. He has relied upon the orders of the authorities below. 7. We have considered the rival submissions as well as the relevant material on record. There is no dispute that the transaction in question regarding payment of purchase of software was completed in the F.Y.2008-09 whereas the decision of Hon'ble jurisdictional High Court in the case of CIT Vs. Samsung Electronics Co. Ltd. (supra) was passed on 15.10.2011 much later than the time of transaction carried out by the assessee. It is also not in dispute that this issue of considering the payment for purchase of software as royalty is a highly debatable issue and various High Courts have taken divergent views on this issue. The co-ordinate Bench of this Tribunal in the case of ACIT Vs. Aurigene Discovery Technologies (P) Ltd. (supra) has considered an identical issue in paras 3 to 5 as under : 03. We heard the rival submissions and gone through the relevant orders. The assessee resubmitted the plea taken before the lower authorities and placed on the ruling of the Hon'ble Bangalore ITAT in Sonata Information Technology Ltd v. ACIT (103 ITD 324 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of Tata Consultancy Services and jurisdictional Tribunal in the case of Samsung Electronics Co. Ltd, the appellant submitted that the said judgment shall not be applicable since it was pronounced on 15/10/2011 and Velankani Mauritius Ltd., whereas the liability to deduct tax for the appellant was the F.Y. 2010-11. The appellant has relied on the judgment of Cochin Tribunal in the case of Kerala Vision Ltd and Agra Tribunal in the case of Virola International, wherein it was held that The law amended was undoubtedly retrospective in nature but so far as tax withholding liability is concerned, it depends on the law as it existed at the point of time when payments, from which taxes ought to have been withheld, were made. The tax-deductor cannot be expected to have clairvoyance of knowing how the law will change in future. Further, software payment was included in definition of royalty only vide Explanation to section 9(1)(vi)inserted retrospectively vide Finance Act, 2012 and when the purchase was made, the appellant did not have the benefit of clarification brought by the retrospective amendment. It is impossible to fasten liability for deducting tax at source retrospectively ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be deducted u/s 194J. The law as extant on the date when the payment for obtaining the software was made, has not categorically laid down that tax is required to be deducted. It is impossible to fasten liability for deducting tax at source retrospectively. 5.4 In view of the above decisions, it is correct to say that it is not possible to fasten liability for deducting tax at source retrospectively as tax is to be deducted at source at the time when the payment is credited or made. When purchase of software was made the assessee did not have the benefit of the clarification brought about by the retrospective amendment. The contention of the appellant is correct that the software payment disallowed by the AO did not warrant withholding o f the tax u/s 40(a) (ia) and 40(a)(ia) (by an order of corrigendum dt 20.11.2015) o f the Ac t. Therefore disallowance made by the AO on account of software payment want of withholding of tax is hereby deleted. 05. The CIT(A) followed the decision of this Tribunal in M/s WS Atkins India Pvt. Ltd, supra, which referred the decisions of Hyderabad Bench of the Tribunal in Infotech Enterprises Ltd in ITA 115/HYD/2011 wherein it has been hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s made prior to 15.10.2011 in assessment year 2012-13 could also not be sustained. 10.1 In view of the above, we are of the opinion that the assessee cannot foresee the changes in the Act which was made wherein Expln. 5 to Section 9(1)(vi) of the Act was inserted vide Finance Act, 2012 w.e.f. 1.6.2016 since these payments are made prior to this amendment. Being so, following the Tribunal order in the case of Acer India Pvt. Ltd. Vs. JCIT (supra), we allow the above ground taken by the assessee. 11. The assessee has raised the following additional grounds : With regard to the additional legal ground relating to deduction of education cess and secondary higher education cess, it is submitted that the Appellant out of abundant caution had not claimed the said deduction in the return of income for the year under consideration in the absence of clarity in respect of the said issue. 12. However, the Ld. AR submitted that recently, the Bangalore Tribunal in the case of Aptean India Private Limited (ITA No.2679/Bang/2017) dated 6 November 2020 and Wipro Limited (IT(TP)A No.99/Bang/2014) dated 5 October 2020, relying on the judgment of Rajasthan High Court judgment in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (IT(TP)A No.99/Bang/2014 Dt. 05.10.2020) (Bangalore Tribunal) iii) DCIT Vs. Graphite India Limited (ITA No.472 474 and CO No.64 66/Kol/2018 dt.22.11.2019) (Kol. Tribunal). iv) Tata Steel Ltd. (ITA No.5616, 4043/M/2012 dt.12.09.2019) (ITAT, Mumbai). v) Peerless General Finance and Investment and Co. Ltd. (ITA No.1469 an 1470/Kol/2019 dt.5.12.2019) (Kol. Tribunal). vi) Atlas Copco India Ltd. (ITA No.736/Pun/2011 dt.5.08.2019) (Pune Tribunal). vii) Bajaj Allianz General Insurance Co. LTd. (ITA No.1111,1112/Pn/2017 Dt.24.07.2017) (Pune Tribunal) viii) ITC Ltd. (ITA No.685/Kol/2014 dt.27.11.2018) (Kol. Tribunal). . Further the ld. AR relied on the following judgments - a) National Thermal Power Co. Ltd. (229 ITR 383) (SC) b) Jute Corportion of India Ltd. (187 ITR 688)(SC) c) Ahmedabad Electricity Co. Ltd. (199 ITR 351)(Bom FB) d) M/s. WheelsIndia Ltd. (ITA No.251/Mds/2010 dt.14.03.2014) (Mad.) e) All Cargo Global Logistics Ltd. Vs.DCIT (ITAT, Special Bench, ITA No.5018/Mum/2010 dt.21.05.2012) In the above cases, the Ld. AR submitted that since there is no question of investigation of fresh facts, the additional ground is a legal issue to be ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the word cess' from the clause. The effect of the omission of the word cess' is that only taxes paid are to be disallowed in the assessments for the years 1962-63 and onwards. 3. The Board desire that the changed position may please be brought to the notice of all the ITOs so that further litigation on this account may be avoided. 14.1 In light of the above judicial development, the ld.AR prayed to kindly accept the additional legal ground of appeal and allow deduction of education cess and secondary higher education cess paid on income-tax under section 37(1) of the Act. 15 The learned Departmental Representative submitted that the assessee has filed additional ground of appeal to claim deduction of Education Cess and Secondary Higher Education Cess paid on income tax for the year and has merely cited judicial decisions in favour. The Ld. DR submitted that this claim is made for the first time before the ITAT. According to the Ld. DR, the argument is mainly on the premises at section 40(a)(ii) of the Act uses the term any rate or tax levied and there is no reference to the term cess . It is submitted that the relevant Finance Act provides for levy of Educ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an additional surcharge for the purposes of the Union, so as to fulfil commitment of the Centre to provide and finance quality health services and education. It has only been termed as a cess. 15. 2. The Ld. DR referred to dictionary meaning of the word' surcharge which means to charge too much or in addition and also additional tax . 'Surcharge' is also defined as an additional charge or tax levied on an existing tax. The Ld. DR relied on the judgment of the Hon'ble Supreme Court in the case of K. Srinivasan (83 ITR 346) which elucidated the concept of surcharge and equated it with an additional tax. It was held that the term 'income-tax' as employed in section 2 includes surcharge and additional surcharge whenever provided. The Ld. DR relied on the judgment of the Hon'ble Karnataka High Court in the case of International Instruments (P.) Ltd. 144 ITR 936 wherein it was held that Surtax levied on the chargeable profits is nothing but an additional tax on profits and gains of the assessee's business, hence, not deductible in computing the total income under the Income-tax Act. Further, the Ld. DR relied on the judgment of the Hon'ble Kera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... HC. Here, the Ld. DR submitted that the attention of the Hon'ble Bombay High Court in Sesa Goa case (117 taxmann.com 96) was not invited to the language used in Finance Act that cess is an additional surcharge only. It is also submitted that the Hon'ble Rajasthan High Court in Chambal Fertilisers and Chemicals (ITA No. 5212018 dated July 31, 2018) reversed the order of the Tribunal wherein it was held by the Tribunal that cess is nothing but an additional surcharge by relying upon the language used in the Finance Act. However, it was submitted that apparently no reasoning has been advanced for discarding the argument that Finance Act has levied additional surcharge terming it to be cess. 15.5. In view of above facts and judicial decisions, it was the submission of the Ld. DR that it may kindly be held that cess being an additional surcharge only would not be allowed as a deduction. Thus, the Ld. AR submitted that the contentions of the assessee raised are liable to be rejected and the additional ground of appeal is not sustainable. 15.6 Without prejudice to above, it was the submission of the Ld. DR that if the Bench admits the Additional Ground of Appeal of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prohibit the deduction of amounts paid by an assessee towards say, education cess or any other cess , then, it could have easily included a reference to cess in clause (ii) of Section 40(a). On the basis of its aforesaid observations, the Hon ble High Court had concluded that now when the legislature had not provided for any prohibition on the deduction of any amount paid towards cess in clause (ii) of Sec. 40(a), therefore, holding to the contrary would amount to reading something which is not to be found in the text of the provision of Sec. 40(a)(ii). Accordingly, the Hon ble High Court had concluded that there was no prohibition on the deduction of any amount paid towards cess in Sec. 40(a)(ii), while computing the income chargeable under the head profits and gains of business or profession , observing as under : 16. The aforesaid question arises in the context of provisions of Section 40(a)(ii) which inter alia provides that notwithstanding anything to the contrary in sections 30 to 38 of the IT Act, the following amounts shall not be deducted in computing the income chargeable under the head Profits and gains of business or profession , (a) in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... retation of the IT Act, it is well established that no tax can be imposed on the subject without words in the Act clearly showing an intention to lay a burden on him. The subject cannot be taxed unless he comes within the letter of the law and the argument that he falls within the spirit of the law cannot be availed of by the department. [See CIT vs Motors General Stores 66 ITR 692 (SC)]. 20. In a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied, into the provisions which has not been provided by the legislature [See CIT Vs Radhe Developers. 341 ITR 403 ]. One can only look fairly at the language used. No tax can be imposed by inference or analogy. It is also not permissible to construe a taxing statute by making assumptions and presumptions [See Goodyear Vs State of Haryana 188 ITR 402(SC)]. 21. There are several decisions which lay down rule that the provision for deduction, exemption or relief should be interpreted liberally, reasonably and in favour of the assessee and it should be so construed as to e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there is no question of reintroducing this expression in Section 40(a)(ii) of IT Act and that too, under the guise of interpretation of taxing statute. 26. In fact, in the aforesaid precise regard, reference can usefully be made to the Circular No. F. No.91/58/66-ITJ(19), dated 18th May, 1967 issued by the CBDT which reads as follows :- Interpretation of provision of Section 40(a)(ii) of IT Act, 1961 Clarification regarding. Recently a case has come to the notice of the Board where the Income Tax Officer has disallowed the cess' paid by the assessee on the ground that there has been no material change in the provisions of section 10(4) of the Old Act and Section 40(a)(ii) of the new Act. 2. The view of the Income Tax Officer is not correct. Clause 40(a)(ii) of the Income Tax Bill, 1961 as introduced in the Parliament stood as under:- (ii) any sum paid on account of any cess, rate or tax levied on the profits or gains of any business or profession or assessed at a proportion of, or otherwise on the basis of, any such profits or gains . When the matter came up before the Select Committee, it was decided to omit the word cess' from the clause. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt held in Jaipuria Samla Amalgamated Collieries Ltd Vs CIT [82 ITR 580] that the expression 'profits or gains of any business or profession' has reference only to profits and gains as determined in accordance with Section 29 of this Act and that any rate or tax levied upon profits calculated in a manner other than that provided by that section could not be disallowed under this sub-clause. Similarly, this sub-clause is inapplicable, and a deduction should be allowed, where a tax is imposed by a district board on business with reference to 'estimated income' or by a municipality with reference to 'gross income'. Besides, unlike Section 10(4) of the 1922 Act, this sub-clause does not refer to 'cess' and therefore, a 'cess' even if levied upon or calculated on the basis of business profits may be allowed in computing such profits under this Act. 30. The Division Bench of the Rajasthan High Court (Jaipur Bench) in Income Tax Appeal No.52/2018 decided on 31st July, 2018 (Chambal Fertilisers and Chemicals Ltd. Vs CIT Range-2, Kota ), by reference to the aforesaid CBDT Circular dated 18th May, 1967 has held that the ITAT erred in holding that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... comes to computation of income chargeable under the head profits or gains of any business or profession. 35. The issue involved in Unicorn Industries ( supra ) was not in the context of provisions in Section 40(a)(ii) of the IT Act. Rather, the issue involved was whether the 'education cess, higher education cess and National Calamity Contingent Duty (NCCD)' on it could be construed as duty of excise which was exempted in terms of Notification dated 9th September, 2003 in respect of goods specified in the Notification and cleared from a unit located in the Industrial Growth Centre or other specified areas with the State of Sikkim. The High Court had held that the levy of education cess, higher education cess and NCCD could not be included in the expression duty of excise and consequently, the amounts paid towards such cess or NCCD did not qualify for exemption under the exemption Notification. This view of the High Court was upheld by the Apex Court in Unicorn Industries (supra ). 36. The aforesaid means that the Supreme Court refused to regard the levy of education cess, higher education cess and NCCD as duty of excise when it came to construing exemption N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oceeding on the assumption that the Assessing Officer in terms of law laid down in Goetze (supra) had no power, proceeded to hold that the Appellate Authority under the IT Act had sufficient powers to permit such a deduction. In taking this view, the Division Bench relied upon the Full Bench decision of this Court in Ahmedabad Electricity Co. Ltd Vs CIT (199 ITR 351) to hold that the Appellate Authorities under the IT Act have very wide powers while considering an appeal which may be filed by the Assessee. The Appellate Authorities may confirm, reduce, enhance or annul the assessment or remand the case to the Assessing Officer. This is because, unlike an ordinary appeal, the basic purpose of a tax appeal is to ascertain the correct tax liability of the Assessee in accordance with law. 40. The decision in Goetze (supra) upon which reliance is placed by the ITAT also makes it clear that the issue involved in the said case was limited to the power of the assessing authority and does not impinge on the powers of the ITAT under section 254 of the said Act. This means that in Goetze (supra), the Hon'ble Apex Court was not dealing with the extent of the powers of the appellate au ..... X X X X Extracts X X X X X X X X Extracts X X X X
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