TaxTMI 
TaxTMI 
2022 (7) TMI 1518
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....ore the Tribunal. However, during the course of hearing the learned AR had argued only two grounds, namely, ground 2 and ground 3. Ground 2 and 3 argued by the learned AR reads as follows:- "2. Allowability of education cess: 2.1 That on the facts and in the circumstances of the case and in law, the learned DRP erred in disallowing the claim of Education Cess and Secondary and Higher Education Cess (collectively referred to as `Cess') made by the appellant by way of additional objection during the year amounting to Rs.INR 42,92,153. 2.2 That on the facts and in the circumstances of the case and in law, the learned AO and the learned DRP ought to grant deduction under section 37(1) of the Act for Cess p....
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....ated that any surcharge or cess by whatever name called shall be included in the term "tax". The Explanation reads as follows:- "Explanation 3.-For the removal of doubts, it is hereby clarified that for the purposes of this sub-clause, the term "tax" shall include and shall be deemed to have always included any surcharge or cess, by whatever name called, on such tax." 6. In view of the amendment, it is clear that cess forms part of the tax and the same cannot be allowed as deduction by virtue of provisions of section 40(a)(ii) of the I.T.Act. Even prior to the insertion of Explanation 3 to section 40(a)(ii) of the I.T.Act, the Kolkata Bench of the Tribunal in the case of M/s.Kanoria Chemicals & Industries Ltd. v. Addl.CIT in ITA....
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....5- 1967", wherein it has been interpreted that the 'Cess' shall not be disallowable. The said Circular for the sake of ready reference is reproduced as under:- "Interpretation of provision of Section 40(a)(ii) of IT Act, 1961 - Clarification regarding.- "Recently a case has come to the notice of the Board where the Income Tax Officer has disallowed the 'cess' paid by the assessee on the ground that there has been no material change in the provisions of section 10(4) of the Old Act and Section 40(a)(ii) of the new Act. 2. The view of the Income Tax Officer is not correct. Clause 40(a)(ii) of the Income Tax Bill, 1961 as introduced in the Parliament stood as under:- "(ii) any sum paid on account of any cess, rate or ....
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....o have followed the aforesaid judgments of the Hon'ble High Courts: a. Decision of Kolkata Bench of the Tribunal in the case of DCIT Vs. ITC Infotech India Ltd, ITA No. 67/Kol/2015 dt. 23-10-2019 b. Decision of Kolkata Bench of the Tribunal in the case of Tega Industries Ltd Vs. ACIT, ITA No. 404/Kol/2017 dt. 23-8-2019 c. Decision of Kolkata Bench of the Tribunal in the case of SREI Infrastructure Finance Ltd Vs.Addl. CIT, R-9, ITA No. 1318/Del/2012 dt. 31-12-2019. 19. However, with due respect to the decisions of the Hon'ble Bombay High Court and Hon'ble Rajasthan High Court and of co-ordinate Benches of this Tribunal, we find that the issue is squarely covered by the decision of the Hon'ble Apex Court o....
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....that surcharge and additional surcharge are part of the income-tax. At this stage, it is pertinent to mention here that 'education cess' was brought in for the first time by the Finance Act, 2004, wherein it was mentioned as under:- " An additional surcharge, to be called the Education Cess to finance the Government's commitment to universalise quality basic education, is proposed to be levied at the rate of two per cent on the amount of tax deducted or advance tax paid, inclusive of surcharge." 22. The provisions of the Finance Act 2011 relevant to the Assessment Year under consideration i.e. 2012-13 are also relevant. For the sake of ready reference, the same is reproduced hereunder:- 2(11) The amount of income-....
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....ur above discussion, the appeal of the department (ITA No. 2439/Kol/2018 for the A.Y 2012-13 is partly allowed and appeal of the assessee (ITA No. 2184/Kol/2018 for the A.Y 2012-13 is dismissed." 7. As regards the assessee's specific contention that the cess is not levied on the profits and gains of any business or profession, we find the same is not acceptable. Though cess is calculated as % of Income-tax, effectively, it is a levy on the profits and gains of the assessee. The cess of 3% calculated on the Income-tax can be represented as % tax on the taxable income also. In the illustration submitted by the learned AR dated 03.05.2022, in page 2, the cess as a percentage of taxable income works out 1%, which demonstrates that, it is the....