Amendment of section 40.
13. In section 40 of the Income-tax Act, in clause (a), in subclause (ii), after Explanation 2, the following Explanation shall be inserted and shall be deemed to have been inserted with effect from the 1st day of April, 2005, namely:––
‘Explanation 3.–– For the removal of doubts, it is hereby clarified that for the purposes of this sub-clause, the term “tax” shall include and shall be deemed to have always included any surcharge or cess, by whatever name called, on such tax.’.
Notes on Clauses:
Clause 13 seeks to amend section 40 of the Income-tax Act relating to amounts not deductible.
Sub-clause (ii) of clause (a) of the said section provides that any sum paid on account of any 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 shall not be deducted in computing the income chargeable under the head “profits and gains of business or profession”.
It is proposed to insert a new Explanation 3 to sub-clause (ii) of clause (a) of the said section to clarify that for the purposes of sub-clause (ii), the term “tax” shall include and shall be deemed to have always included any surcharge or cess, by whatever name called, on such tax.
This amendment will take effect retrospectively from 1st April, 2005 and will, accordingly, apply in relation to the assessment year 2005-2006 and subsequent assessment years.
