TaxTMI 
TaxTMI 
2026 (6) TMI 1128
X X X X Extracts X X X X
X X X X Extracts X X X X
....er consideration are that the assessee is a Non-Banking Finance Company (NBFC) registered with Reserve Bank of India and engaged in the business of Asset Financing such as such as Car, Construction Equipment, Commercial Vehicle Home Loan etc. Income of Rs. 58,08,12,930/- declared in the return of income for A.Y. 2019-20 e-filed on 24.10.2019. Assessment u/s.143(3) r.w.s.260 of the Act completed on 31.12.2022 wherein apart from other additions disallowance was also made for Education Cess and assessed the income at Rs,58,08,13,410/-. In the assessment order itself, ld. Assessing Officer initiated penalty proceedings u/s.270A(2)(a) of the Act for the under reporting of income regarding claiming Education Cess as expenditure. Thereafter, ld. Assessing Officer issued separate notice u/s.274 of the Act and proceeded further levying penalty u/s.270A of the Act. 4. It was submitted by the assessee that assessee made claim of expenditure towards Education Cess on the basis of judgments of various Hon'ble High Courts consistently holding that Education Cess is allowable as expenditure. Thereafter, by Finance Act, 2022 an amendment was made in section 40(a)(ii) of the Act retrospectively ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing expenditure towards Education Cess. We note that the assessee has claimed the expenditure of Education Cess at Rs. 93,84,000/- in its return of income. In absence of any specific provisions under the Act, at that point of time, various assessee(s) have been claiming Education Cess as an expenditure in light of the judicial precedents. Few of them have been referred by ld. Counsel for the assessee in the legal paper book 1. Jaipuria Samla Amalgamated Collieries Ltd. v. Commissioner of Income-tax [1971] 82 ITR 580 (SC) 2. Chambal Fertilisers & Chemicals Ltd. v. Joint Commissioner of Income-tax, Range-2, Kota [2019] 107 taxmann.com 484 (Rajasthan) 3. Sesa Goa Ltd. v. Joint Commissioner of Income-tax, Range 1, Panaji Goa [2020] 117 taxmann.com 96 (Bombay) 4. M/S. Bajaj Allianz General Insurance v. Deputy Commissioner of Income Tax [ITA Nos. 1111 & 1112/PUN/2017] (Pune Trib.) dt. 25.07.2019 9. Assessee has claimed the expenditure based on the settled judicial precedents. However, when the case was selected for scrutiny, the assessment has been framed u/s.143(3) r.w.s.260 of the Act and ld. Assessing Officer has disallowed the Education Cess cla....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of the Act. Section 155(18) of the Act provides that only in a case where the Education Cess has been claimed and allowed then the assessee can avail the window available provided in proviso to section 155(18) to make an application to the Assessing Officer on Form No.69. But in the present case, though the assessee has made a claim in the income tax return but its claim has not been allowed by the Assessing Officer as the amount has already been disallowed in the assessment order u/s.143(3) r.w.s.260 of the Act. In view of the above, since the assessee has made legitimate claim based on the settled judicial precedents and amendment inserting Explanation 3 to section 40(a)(ii) has been made retrospectively from 01.04.2005 by the Finance Act, 2022 and thirdly the assessee case is not covered by the provisions of section 155(18) of the Act as the claim of Education Cess has not been allowed by the Assessing Officer in the return processed u/s.143(1)(a) or in the assessment order u/s.143(3) of the act therefore it is not a case of under reporting of income. In our view, ld.CIT(A) erred in confirming the action of the Assessing Officer levying penalty u/s.270A of the Act. Impugned pena....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... approx.. Further, the assessee challenged the disallowance before ld.CIT(A) but failed to succeed. Before this Tribunal the first contention of the ld. Counsel for the assessee is that assessee has not earned any exempt income during the year and reference was made to the income tax return Schedule E1. We note that that no income is reported under the head exempt income. The fact that the assessee has not earned any exempt income also gets supported with the observation of ld. Assessing Officer where while calculating disallowance u/s.14A of the Act there is no reference of any exempt income earned by the assessee. It has been consistently held by Hon'ble Courts that in absence of any exempt income no disallowance u/s.14A of the Act can be made prior to the amendment brought in by the Finance Act w.e.f. 01.04.2022. We note that Hon'ble Madras High Court in the case of Redington. (India) Ltd. vs. ACIT [2017] 392 ITR 633 (2017) 392 ITR 633 has held that by application of the matching concept, in a year where there is no exempt income, there cannot be a disallowance of expenditure in relation to such assumed income. Similarly, Hon'ble Delhi High Court in the case of Cheminvest Ltd. V....