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of <h1>Clarification on Income Tax Act Section 40(a)(ii): 'Cess' Deduction Allowed, Only Taxes Disallowed from Fiscal Year 1962-63 Onwards.</h1> The circular addresses the interpretation of Section 40(a)(ii) of the Income Tax Act, 1961, clarifying that the Income Tax Officer (ITO) incorrectly disallowed the deduction of 'cess' paid by an assessee. Initially, the clause included 'cess' along with taxes and rates, but the Select Committee decided to omit 'cess' from the provision. Consequently, only taxes are to be disallowed in assessments from the fiscal year 1962-63 onwards. The Board instructs that this clarification be communicated to all ITOs to prevent further litigation on this matter.
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