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Issues: Whether education cess paid by the assessee could be allowed as an expenditure under Section 37 read with Section 40(a)(ii) of the Income-tax Act, 1961 in view of the retrospective amendment made by the Finance Act, 2022.
Analysis: The respondent-assessee accepted that, because of the amendment made by the Finance Act, 2022 with retrospective effect from 01.04.2005 to Section 40(a)(ii) of the Income-tax Act, 1961, the claim for allowance of education cess as an expenditure could not survive. The Court recorded that the disallowance covered education cess as an item not allowable under the stated provisions.
Conclusion: Education cess paid by the respondent-assessee was held not allowable as an expenditure under Section 37 read with Section 40(a)(ii) of the Income-tax Act, 1961.
Ratio Decidendi: In view of the retrospective amendment to Section 40(a)(ii) of the Income-tax Act, 1961, education cess is not deductible as business expenditure under Section 37 read with Section 40(a)(ii).
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