AI Drafter 
TaxTMI 
TaxTMI 
2021 (11) TMI 138
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....AO not granting deduction of educational Cess (including Secondary & Higher Education Cess) while computing total income for relevant assessment year. According to Ld. AR, the Hon'ble Bombay High Court in the case of M/s. Sesa Goa Ltd. Vs. JCIT (2020) 423 ITR 426 (Bom.) and Hon'ble Rajasthan High Court in the case of M/s. Chambal Fertilisers & Chemicals Ltd. Vs. CIT, ITA No. 52/2018 dated 31.07.2018 has held that the provisions of section 40(a)(ii) of the Income-tax Act, 1961 (hereinafter referred to as the "Act") does not include Cess and consequently Cess whenever paid in relation to business is allowable as deductible expenditure and he pointed out to the decision of this Tribunal in plethora of cases. Further according to Ld. AR....
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....d the Hon'ble Rajasthan High Court in the case of M/s. Chambal Fertilizers & Chemicals Ltd. (supra) have held that educational Cess is an allowable expense. The Hon'ble Bombay High court in the case of M/s. Sesa Goa Ltd. (supra) held on this issue as under: "15. The substantial question of law No. (iii) in Tax Appeal No. 17 of 2013 and the only substantial question of law in Tax Appeal No. 18 of 2013 is one and the same namely, 'whether Education Cess and Higher and Secondary Education Cess, collectively referred to as "cess" is allowable as a deduction in the year of its payment?'. .... 28. In the Income-tax Act, 1922, section 10(4) had banned allowance of any sum paid on account of 'any cess,....
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....Court held in Jaipuria Samla Amalgamated Collieries Ltd. v. CIT 1971 [82 ITR 580] that the expression 'profits or gains of any business or profession' has reference only to profits and gains as determined in accordance with Section 29 of this Act and that any rate or tax levied upon profits calculated in a manner other than that provided by that section could not be disallowed under this sub-clause. Similarly, this sub-clause is inapplicable, and a deduction should be allowed, where a tax is imposed by a district board on business with reference to 'estimated income' or by a municipality with reference to 'gross income'. Besides, unlike Section 10(4) of the 1922 Act, this sub-clause does not refer to 'cess' a....
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....ia Ltd. (supra). 42. For all the aforesaid reasons, we hold that the substantial question of law No. (iii) in Tax Appeal No. 17 of 2013 and the sole substantial question of law in Tax Appeal No. 18 of 2013 is also required to be answered in favour of the Appellant - Assessee and against the Respondent-Revenue. To that extent therefore, the impugned judgments and orders made by the ITAT warrant interference and modification." 6. In the light of the aforesaid decision of the Hon'ble Bombay High Court and Rajasthan High Court in the case of M/s. Sesa Goa Ltd. (supra) and M/s. Chambal Fertilizers & Chemicals Ltd. (supra) respectively, we allow this additional ground of appeal and direct the AO to allow deduction of educational C....
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....ause a liability has been held to be a present liability qualifying for instant deduction in terms of the applicable provisions at the relevant time does not ipso facto signify that deduction against such liability cannot be regulated by a law made by Parliament prospectively. In matter of statutory deductions, it is open to the legislature to withdraw the same prospectively. In other words, once the Finance Act, 2001 was duly passed by the Parliament inserting clause (f) in section 43B with prospective effect, the deduction against the liability of leave encashment stood regulated in the manner so prescribed. Be it noted that the amendment does not reverse the nature of the liability nor has it taken away the deduction as such. The liabili....