TMI Blog2021 (10) TMI 1420X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee is liable to payment of interest, no adjustment is warranted. There cannot be one straight jacketed formula to allege that the assessee has received interest or the delay was allowed to confer an undue advantage to the other party. There can be a delay in the collection of monies for the supplies made, even beyond the agreed limit, due to various factors which would be investigated on a case to case basis and also the case of Gillette India Limited [ 2017 (7) TMI 1188 - RAJASTHAN HIGH COURT ] wherein as affirmed the order of the Tribunal wherein it was held that the transaction of allowing credit period to the AE for realization of its sale proceeds is not an independent international transaction but is closely linked with the sale transactions of the AE. Decided in favour of assessee. Deduction of Education Cess - Reading the provisions of Section 40(a)(ii), the assessee argued that education cess paid on Income Tax doesn t come under the purview of the definition as it is levied on the amount of Income Tax but not on profits of business - HELD THAT:- keeping in view the provisions of the Act pertaining to Section 40(a)(ii) and Section 115JB, Circular of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce provided by the assessee. The net foreign exchange recorded pertains to the service income received from AE, forming an inherent part of the consideration received for export of service and hence, it should be a part of the operating margin of the Appellant and shouldn t be excluded so as to make the operating margin comparable to that of the comparables. Further, it was argued as per the service agreement between the assessee and its AE, the forex fluctuations will be compensated by the AE in case of any loss due to exchange rate fluctuation occurring between date of invoice and date of payment. Hence, it is clear that the foreign exchange risk is not borne by the assessee. Accordingly, any gain or loss arising from foreign exchange fluctuation would form part of the computation of mark-up and hence should be treated as operating in nature. 7. It was argued that the assessee has consistently included forex as an operating item while computing its margins. Foreign exchange gain/loss has been accepted as an operating item by the TPO in AY 2013-14. Thus, the Department does not have any plausible reason to change the treatment of forex to a nonoperating item in FY 2014-15. 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. 15. It is settled principle that there is no need to benchmark the interest on receivables wherein the interest has not been charged from either of the parties i.e. payables and receivables. In the instant case, period of 90 days has been allowed and the amounts have been received within the range of 90 to 95 days. In the absence of any fact to prove that the assessee is liable to payment of interest, no adjustment is warranted. There cannot be one straight jacketed formula to allege that the assessee has received interest or the delay was allowed to confer an undue advantage to the other party. Reliance is being placed in the case of Pr. CIT vs. Kusum Health Care Pvt. Ltd. (ITA No. 765/2016) wherein the Hon ble Delhi High Could held that the inclusion in the Explanation to Section 92B of the Act of the expression receivables does not mean that de hors the context, every item of receivables appearing in the accounts of an entity which may have dealings with the foreign AEs, would automatically be characterized as an international transaction. It further went on to hold that there can be a delay in the collection of monies for the supplies made, even beyond the agreed limi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ering questions of law arising in assessment proceedings although not raised earlier. 6. In the case of Jute Corporation of India Ltd. v. C.I.T. . this Court, while dealing with the powers of the Appellate Assistant Commissioner observed that an appellate authority has all the powers which the original authority may have in deciding the question before it subject to the restrictions or limitations, if any, prescribed by the statutory provisions. In the absence of any statutory provision, the appellate authority is vested with all the plenary powers which the subordinate authority may have in the matter. There is no good reason to justify curtailment of the power of the Appellate Assistant Commissioner in entertaining an additional ground raised by the assessee in seeking modification of the order of assessment passed by the Income-tax Officer. This Court further observed that there may be several factors justifying the raising of a new plea in an appeal and each case has to be considered on its own facts. The Appellate Assistant Commissioner must be satisfied that the ground raised was bona fide and that the same could not have been raised earlier for good reasons. The Appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITA No. 685/Kol/2014 dated 27.11.2018 wherein it was held that the education cess is an allowable expenditure. 24. The ld. AR has also relied in the case of Peerless General Finance Investment Co. Ltd. Vs DCIT in ITA No.937 938/Kol/2018 dated 24.03.2019 wherein it was held that education cess is not tax and is an allowable expenditure. 25. The ld. DR argued that it is not the appropriate forum to raise the issue at this juncture. Since, there is no dispute between the assessee and the Assessing Authorities, a non-dispute cannot be adjudicated. He argued that the education cess is a part of the Income Tax and is a charge on the assessee. Hence, it cannot be treated as expense eligible for deduction. 26. Heard the arguments of both the parties and perused the material available on record. 27. Regarding the claim of education cess 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 31. Thus, wherever the legislature wanted to include this term specifically in the statue it has done so under the Act. The term 'tax' has been defined in section 2(43) of the Act to include only Income-tax, Super Tax and Fringe Benefit Tax (FBT). Provision of the section 2(43) is as given below: tax in relation to the assessment year commencing on the 1st day of April, 1965, and any subsequent assessment year means income-tax chargeable under the provisions of this Act, and in relation to any other assessment year income-tax and super-tax chargeable under the provisions of this Act prior to the aforesaid date and in relation to the assessment year commencing on the 1st day of April, 2006, and any subsequent assessment year includes the fringe benefit tax payable under section 115WA. 32. Surcharge on income-tax finds place 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 according ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary education- Prarambhik Shiksha Kosh . Since the proceeds from collection of Education Cess are kept separate for a specified purpose, applying the principles in the aforesaid decision of Apex Court in the case of M/s Dewan Chand Builders (supra), it can be said that the same is not in the nature of tax. Hence, it is allowable as deduction. 36. Further, Provisions of Section 37 are perused which are as under: 37. (1) Any expenditure (not being expenditure of the nature described in sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee), laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head Profits and gains of business or profession . Explanation 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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