2021 (11) TMI 138 - AT - Income Tax

Deduction of educational Cess (including Secondary Higher Education Cess) - Admission of additional ground -.DR opposing the additional ground of appeal of the assessee contended that the assessee has not claimed deduction of Cess before the AO and therefore, should not be allowed - HELD THAT - Hon'ble Bombay High Court in the case of M/s. Sesa Goa Ltd. 2020 (3) TMI 347 - BOMBAY HIGH COURT .and Chambal Fertilizers Chemicals Ltd. 2018 (10) TMI 589 - RAJASTHAN HIGH COURT have held that educational Cess is an allowable expense. Thus we allow this additional ground of appeal and direct the AO to allow deduction of educational Cess (including Secondary Higher Education Cess) in the revised computation of income. Addition of provision made for leave encashment in the current assessment year on the basis of actuarial valuation - HELD THAT - Hon'ble Supreme Court has decided this issue against the assessee in the case of UOI Vs. Exide Industries Ltd . 2020 (4) TMI 792 - SUPREME COURT .we are inclined to uphold the order of the Ld. CIT(A) and dismiss this ground of appeal of the assessee.

Summary

Issues:
1. Appeal against order of Ld. CIT(A)-6, Kolkata for Assessment year 2016-17.
2. Additional ground of appeal regarding deduction of educational Cess.
3. Disallowance of provision made for leave encashment based on actuarial valuation.

Analysis:
1. The appeal was filed by the Assessee against the order of Ld. CIT(A)-6, Kolkata for the Assessment year 2016-17. The Assessee raised an additional ground regarding the deduction of educational Cess, citing precedents from the Hon'ble Bombay High Court and Hon'ble Rajasthan High Court. The Ld. AR argued that Cess is allowable as a deductible expenditure and pointed out that the chargeability of tax is a legal issue that can be raised before the Tribunal. The Ld. DR opposed the additional ground, stating that the Assessee did not claim the deduction before the AO. The Tribunal noted the Assessee's claim for deduction of educational Cess and referred to the decisions of the Hon'ble Bombay High Court and Hon'ble Rajasthan High Court, which held that educational Cess is an allowable expense. The Tribunal allowed the additional ground of appeal, directing the AO to allow deduction of educational Cess as per the revised computation of income.

2. The Assessee also raised a ground regarding the disallowance of a sum made for leave encashment based on actuarial valuation. The Ld. DR pointed out that the issue has been decided against the Assessee by the Hon'ble Supreme Court in a specific case. The Supreme Court held that the deduction against the liability of leave encashment is regulated by a law made by Parliament prospectively. The Tribunal, in light of the Supreme Court decision, upheld the order of the Ld. CIT(A) and dismissed this ground of appeal raised by the Assessee.

3. In conclusion, the Tribunal partly allowed the appeal of the Assessee, allowing the deduction of educational Cess but upholding the disallowance of the provision made for leave encashment based on actuarial valuation. The order was pronounced on 26th October 2021.