9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2020 (8) TMI 560 - AT - Income TaxDisallowance u/s 40(a)(ii) - tds on cess on income tax - Whether the aforesaid amount is towards the cess on income tax and is not allowable u/s 40(a)(ii)? - HELD THAT - Hon ble Bombay High Court in the case of Sesa Goa Ltd. 2020 (3) TMI 347 - BOMBAY HIGH COURT has held that education cess and higher and secondary education cess to be eligible for deduction while computing income chargeable under the head of Profit and Gains of Business. The Hon ble High Court has held that though cess may be collected as part of income tax but that does not render such cess either rate or tax which cannot be deducted in terms of provision of section 40a(ii) of the Act. We further find that Hon ble High Court while arriving at the aforesaid conclusion had also considered the CBDT Circular No. F. No. 91/58/66-ITJ(19), dated 18.05.1967. Revenue has not placed any contrary binding decision in its support. In such situation, we, relying on the decision of Hon ble Bombay High Court in the case of Sesa Goa (supra) hold that the AO was not justified in disallowing the amount of cess paid on income tax. We therefore, direct its deletion. Thus, ground of appeal of the assessee is allowed.
Issues involved:
1. Disallowance of expenditure on account of cess on income tax. 2. Reopening of assessment under section 147 of the Act. 3. Challenge to reassessment proceedings. 4. Disallowance of a sum of ?14,21,208/- on account of cess on income tax. Analysis: 1. Disallowance of expenditure on account of cess on income tax: The appeal was against the order of the Commissioner of Income Tax (A)-33, New Delhi for Assessment Year 2007-08. The Assessing Officer (AO) had reopened the assessment under section 147 of the Act due to two reasons. Firstly, disallowance of expenditure on account of cess on income tax and secondly, underassessment of income due to a provision for doubtful debt. The AO made additions based on these reasons. The CIT(A) deleted the addition for doubtful debt but upheld the disallowance of expenditure on cess on income tax. The appellant challenged this disallowance, arguing that the cess should be allowed as a deduction. The appellant relied on a decision of the Hon'ble Bombay High Court which held that education cess and other similar cess are eligible for deduction while computing income chargeable under the head of 'profits and gains of business or profession'. The ITAT, Delhi, after considering the arguments and the Bombay High Court decision, held in favor of the appellant, directing the deletion of the disallowed amount. 2. Reopening of assessment under section 147 of the Act: The AO had reopened the assessment under section 147 of the Act due to the reasons mentioned above. The appellant challenged the reopening of the assessment before the CIT(A) but the CIT(A) did not adjudicate on this issue specifically. However, since the ITAT decided the main issue in favor of the appellant, the challenge to the reopening of the assessment was considered academic and dismissed. 3. Challenge to reassessment proceedings: The appellant had raised grounds challenging the reassessment proceedings. However, since the main issue of disallowance of expenditure on cess on income tax was decided in favor of the appellant, the grounds challenging the reassessment proceedings were considered academic and not adjudicated upon. 4. Disallowance of a sum of ?14,21,208/- on account of cess on income tax: The disallowance of the amount on account of cess on income tax was the main issue in this case. The AO disallowed this amount under section 40(a)(ii) of the Act. The appellant contested this disallowance, arguing that the cess should be allowed as a deduction. The ITAT, Delhi, relying on the decision of the Hon'ble Bombay High Court, held that the AO was not justified in disallowing the amount of cess paid on income tax and directed its deletion. Consequently, the ground of appeal of the appellant was allowed. In conclusion, the ITAT, Delhi partly allowed the appeal filed by the assessee, directing the deletion of the disallowed amount of expenditure on cess on income tax based on the decision of the Hon'ble Bombay High Court, and dismissing the grounds challenging the reassessment proceedings as they were rendered academic.
|
