2020 (8) TMI 719 - AT - Income Tax

Deduction of Education Cess - claim of cess incurred during the year under consideration and which was claimed during the assessment proceedings - HELD THAT - We observe that similar issue stands adjudicated by us in assessee s own case for the Assessment Year 2012-13 to 2014-15 wherein we have decided in favour of the assessee allowing the claim of education cess to be allowed as an expenditure after relying the judgment of of Chambal Fertilizers and Chemicals Limited. 2018 (10) TMI 589 - RAJASTHAN HIGH COURT Thus we allow the claim of education cess as an expenditure - Decided in favour of assessee.

Summary

Issues:
Allowability of education cess as an expenditure.

Analysis:
The appeal pertains to the rejection of the claim of education cess as an expenditure by the revenue for the Assessment Year 2016-17. The appellant, engaged in coal trading, had made a fresh claim of deduction of education cess during the assessment proceedings, which was not accepted by the Assessing Officer. The appellant, dissatisfied with the order, appealed before the CIT(A) and further before the Tribunal solely on the issue of the allowability of education cess.

The appellant contended that the education cess should be allowed as an expenditure based on various judgments, including those of the Supreme Court and High Courts. The appellant relied on precedents indicating that rightful claims made during assessment proceedings cannot be denied, and that the cess is an allowable expenditure not hit by disallowance under the Income Tax Act.

The Departmental Representative opposed the submissions, arguing against fresh claims during assessment proceedings. However, it was acknowledged that if such claims are allowable under the law, they can be entertained at the appellate stage. The issue was found to be covered in favor of the assessee by a previous decision of the Indore Tribunal in the appellant's own case.

The Tribunal, after hearing the contentions and examining the judgments cited, observed that the grievance raised by the assessee centered on the rejection of the education cess expenditure claim. Relying on its previous decision and the judgment of the High Court of Rajasthan, the Tribunal held that education cess is not a tax but an expenditure under Section 37 of the Act, thus allowing the claim of education cess as an expenditure. Consequently, the sole ground raised by the assessee was allowed, directing the revenue authorities to treat the education cess as an allowable expenditure.

In conclusion, the Tribunal allowed the appeal of the assessee, directing the revenue authorities to allow the claim of education cess as an expenditure. Another ground, which was general in nature, was not adjudicated upon. The order was pronounced in open court on 24.08.2020.