Deductibility of Bengal cesses under income tax law: separate statutory assessments did not trigger the section 10(4) bar.

Road and public works cess and education cess levied under the Bengal cess enactments were held not to be disallowable under section 10(4) of the Indian Income-tax Act, 1922, because that bar applies only to profits or gains as computed under the Income-tax Act, not to amounts assessed under a separate statutory scheme. The cesses were not levied on business profits themselves; they were assessed by reference to annual net profits or, where necessary, valuation and a statutory percentage. On that construction, the cesses remained deductible under section 10(2)(ix) or section 10(2)(xv), and the contrary view was rejected.

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Issues: Whether road and public works cess and education cess levied under the Bengal cess enactments were disallowable under section 10(4) of the Indian Income-tax Act, 1922, or were deductible under section 10(2)(ix) or section 10(2)(xv) of that Act.

Analysis: The cesses were not levied on the profits or gains of the business itself. Their assessment under the Bengal Cess Act and the Bengal (Rural) Primary Education Act was made with reference to annual net profits or, where necessary, by valuation and a statutory percentage thereon. The statutory expression in section 10(4) was held to refer to profits or gains as determined under the Income-tax Act and not to any income or profit computed under a different statutory scheme. On that construction, the cesses did not fall within the bar created by section 10(4). The prior authorities treating similar imposts as deductible supported this view, and the contrary approach of the High Court was rejected.

Conclusion: The cesses were deductible and section 10(4) did not apply. The answer was in favour of the assessees and against the revenue.

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