Clarification regarding treatment of cess and surcharge

Tax treatment of cess and surcharge: centrally imposed cesses as additional surcharges are non deductible under Section 40(a)(ii).

The document addresses whether amounts called cess or surcharge are deductible under Section 40(a)(ii), which disallows sums paid on account of any rate or tax levied on business profits. It explains that centrally imposed cesses described in Finance Acts as additional surcharges function as part of income tax and therefore fall within the disallowance, contrasts that with state cesses which historically were treated as allowable, and states a retrospective explanatory amendment will clarify that 'tax' includes any surcharge or cess by whatever name called for purposes of the provision.