TMI Blog2022 (1) TMI 1263X X X X Extracts X X X X X X X X Extracts X X X X ..... r it to pay Education Cess and for the purpose of computation of Education Cess, the Income Tax is taken as the criteria for computational purpose. Thus, the expense of Education Cess is mandatory expenses to be paid but does not fall under capital expense and personal expenditure and hence may be allowed as deduction. We have also gone through the various judgments of judicial authorities pan India wherein the fresh claim of the assessee is considered and the deduction u/s 37 of Education Cess has been allowed. The Hon ble High Court of Bombay held [ 2020 (3) TMI 347 - BOMBAY HIGH COURT ] that the appellate authorities may confirm, reduce, enhance or annul the assessment or remand the case to the AO, because the basic purpose of a tax appeal was to ascertain the correct tax liability in accordance with the law. Hence, keeping in view the provisions of the Act pertaining to Section 40(a)(ii) and Section 115JB, Circular of the CBDT No. 91/58/66ITJ(19) we hereby hold that the assessee is eligible to claim the deduction of the Education Cess as per the provisions of Section 37 of the Income Tax Act. - Decided in favour of assessee. - ITA No. 475/Del/2018 - - - Dated:- 18-1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emains stock of Gold, Silver and other precious metals in various located mints. Gold and Silver is also refined. Disallowance u/s 14A: 8. During previous year 2010-11, the assessee has received dividend from UTI Treasury Advantage Fund under Institutional Plan Scheme amounting to Rs.4,31,89,170/-. It was claimed as exempted income u/s 10(34) in the return of income filed. The assessee has been investing in this fund out of its own surplus and does not borrow any amount for the purpose. It has not incurred any borrowing interest directly or indirectly during the previous year. In fact, the fund is being managed by investment advisors M/s SPA Merchant Banker Limited as honorary services without any cost to assessee. It has been advising and also daily managing this fund portfolio for assessee without any cost. The company has been executed this fund on the advice of the investment advisors. The investment advisors engaged does not get any fees/remuneration as stated above being so settled between the assessee and investment advisors vide renewed letter No. SPMCIL/UTI/73/06/6143 dated 30.06.2010. In fact, no indirect expense on account of establishment audit fees or otherw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 incurred the incurred the said expenditure. Keeping in view the facts that it has been printing currency notes, postal order and highly sensitive security items, it is necessary for the smooth conduct of the activities of the assessee to have positive environmental goodwill and social relations with the nearby locality. It has been incurring expense under CSR policy voluntarily without any statutory compulsion except the direction of Ministry of Finance under a MoU for the purpose. The assessee at some place of its industrial units has its own staff colonies and quarters where CSR expenditure have been incurred for the maintenance of pump house, K.V. Station and maintenance of staff quarters. Primary ambulance and medical aid to dispensary set up for staff and other village people. A statement stating nature of CSR activities has also been enclosed which has been duly perused. The AO disallowed this claim taking a view that the expenditure incurred are capital nature and are enduring benefit to assessee. 13. During appellate proceedings, it was submitted that explanation 2 to section 37(1) of Income Tax Act 1961 was inserted in Finance Act 2015. It does not have retrospective ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as an allowable expenditure, we find that the CBDT vide Circular No. 91/58/66 ITJ(19) clarified as under: Interpretation of provisions of Section 40(a)(ii) of the I.T Act clarification regarding. Section 40(a)(ii) Recently a case has come to the notice of the Board where the ITO 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 ITO is not correct. Clause 40(a)(ii) of the IT Bill, 1961 as introduced in the Parliament stood as under: (a) 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ace in the First Schedule, but that is not the case so far as Education Cess is concerned. Therefore, the education cess on this reasoning cannot be equated as tax or surcharge. Based on this, it can be said that since the word 'Cess' is not specifically included in the definition, it cannot be considered a part of tax, and accordingly, it should not be disallowed in u/s 40(a)(ii) of the Act. 28. Further, we are guided by the judgment of the Constitutional bench which was also referred in the case of Dewan Chand Builders Contractors Vs Union of India Others in Civil Appeal No. 1830 of 2008 dated 18.11.2011. 29. The Constitution Bench of this Court in Hingir Rampur Coal Co. Ltd. Vs. State of Orissa2 was faced with the challenge to the constitutional validity of the Orissa Mining Areas Development Fund Act, 1952, levying Cess on the petitioner's colliery. The Bench explained different features of a `tax', a `fee' and `cess' in the following passage: The neat and terse definition of Tax which has been given by Latham, C.J., in Matthews v. Chicory Marketing Board (1938) 60 C.L.R. 263 is often cited as a classic on this subject. A Tax , said Latha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anation 1.-For the removal of doubts, it is hereby declared that any expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law shall not be deemed to have been incurred for the purpose of business or profession and no deduction or allowance shall be made in respect of such expenditure. Explanation 2.-For the removal of doubts, it is hereby declared that for the purposes of sub-section (1), any expenditure incurred by an assessee on the activities relating to corporate social responsibility referred to in section 135 of the Companies Act, 2013 (18 of 2013) shall not be deemed to be an expenditure incurred by the assessee for the purposes of the business or profession. 32. From the above, we find that Education Cess is not of the nature described in sections 30 to 36, Education Cess is not in the nature of capital expenditure, Education Cess is not personal expense of the Assessee, it is mandatory for it to pay Education Cess and for the purpose of computation of Education Cess, the Income Tax is taken as the criteria for computational purpose. Thus, the expense of Education Cess is mandatory expenses to be paid but does not f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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