TMI Blog2020 (11) TMI 943X X X X Extracts X X X X X X X X Extracts X X X X ..... (2) of the Rules. Assessee had furnished the workings for the same on without prejudice basis in page 7 of the paper book. The ld. AO is directed to go through the same and re-compute the disallowance u/s.14A by considering only those investments which had actually yielded exempt income under Rule 8D(2)(iii) of the Rules. On such re-computation, the ld. AO is also directed to reduce the sum of ₹ 5,40,000/- being the amount already disallowed voluntarily by the assessee. Ground Nos.1 1.3 raised by the assessee are allowed for statistical purposes. Deduction of education cess u/s.37(1) - additional ground raised by the assessee - HELD THAT:- As in the light of the decision of the Hon ble Supreme Court in the case of NTPC Ltd [ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y (NBFC) duly registered with Reserve Bank of India (RBI) and is engaged in the business of financing of bill discounting. The return of income for the A.Y.2012-13 was filed on 19/09/2012 declaring total income of ₹ 2,16,21,270/-. We find that assessee had earned dividend income of ₹ 9,84,75,987/- and claimed the same as exempt in the return of income. Against this exempt income, the assessee had voluntarily disallowed ₹ 5,40,000/- towards expenses incurred for earning dividend income u/s.14A of the Act. The assessee when confronted by the ld. AO as to why the disallowance of expenses u/s.14A of the Act should not be made in accordance with computation mechanism provided in Rule 8D of the Rules, replied vide letter dated 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tments which had actually yielded exempt income should be considered for the purpose of working out the disallowance under third limb of Rule 8D(2) of the Rules. We find that the assessee had furnished the workings for the same on without prejudice basis in page 7 of the paper book. The ld. AO is directed to go through the same and re-compute the disallowance u/s.14A by considering only those investments which had actually yielded exempt income under Rule 8D(2)(iii) of the Rules. On such re-computation, the ld. AO is also directed to reduce the sum of ₹ 5,40,000/- being the amount already disallowed voluntarily by the assessee. 3.3. The ground Nos.1 1.3 raised by the assessee are allowed for statistical purposes. 4. We find th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of expression cess and consequently, this expression finds no place in the final text of the provision in Section 40(a)(ii) of the IT Act, 1961. The effect of such omission is that the provision in Section 40(a)(ii) does not include, cess and consequently, cess whenever paid in relation to business, is allowable as deductable expenditure. 29. In Kanga and Palkhivala's The Law and Practice of income Tax (Tenth Edition), several decisions have been analyzed in the context of provisions of Section 40(a)(ii) of the IT Act, 1961. There is reference to the decision of Privy Council in CIT Vs Gurupada Dutta 14 ITR 100, where a union rate was imposed under a Village Self Government Act upon the assessee as the owner or occupier o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITAT erred in holding that the education cess is a disallowable expenditure under Section 40(a)(ii) of the IT Act. Ms. Linhares was unable to state whether the Revenue has appealed this decision. Mr. Ramani, learned Senior Advocate submitted that his research did not suggest that any appeal was instituted by the Revenue against this decision, which is directly on the point and favours the assessee. 31. Mr. Ramani, in fact pointed out three decisions of ITAT, in which, the decision of the Rajasthan High Court in Chambal Fertilisers and Chemicals Ltd.(supra) was followed and it was held that the amounts paid by the ssessee towards the 'education cess' were liable for deduction in computing the income chargeable under the head ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... others, 2019 SCC Online SC 1567 in support of her contention that cess is nothing but tax and therefore, there is no question of deduction of amounts paid towards cess when it 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 loca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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