1991 (9) TMI 113 - AT - Income Tax

Summary

Issues:
1. Addition of cess under section 43B of the IT Act.
2. Charging of interest under section 215 of the IT Act.

Detailed Analysis:

1. Addition of Cess under Section 43B:
The appeal was against the CIT(A)'s order confirming the addition of Rs. 2,40,180 under section 43B of the IT Act for the assessment year 1985-86, relating to cess on tea and educational cess. The assessee argued that cess should not be disallowed under section 43B as it is distinct from tax or duty. The authorized representative cited a case to support this argument. The Departmental Representative, however, contended that judicial pronouncements treated cess as a tax. The CIT(A) relied on legal definitions equating cess to tax. The ITAT agreed with the assessee's representative, emphasizing that cess is different from tax or duty. Referring to a Supreme Court decision, the ITAT ruled that deduction for cess cannot be disallowed under section 43B if the liability was incurred in the relevant accounting year, even if not paid before the year-end. The ITAT reversed the CIT(A)'s decision, holding that the addition of cess under section 43B was not justified.

2. Charging of Interest under Section 215:
The second ground of appeal involved the charging of interest under section 215 of the IT Act. The CIT(A) had modified the interest charge based on the revised assessed tax after appeal effect. The assessee's representative argued that the CIT(A) did not consider the legality of charging interest under section 215. The Departmental Representative supported the CIT(A)'s order. The ITAT noted that the CIT(A) did not provide a specific finding on the issue of the chargeability of interest under section 215. Therefore, the ITAT remitted this point back to the CIT(A) to determine whether interest under section 215 was leviable or not, after giving the assessee a reasonable opportunity. Ultimately, the ITAT allowed the assessee's appeal.

In conclusion, the ITAT ruled in favor of the assessee on both issues, holding that the addition of cess under section 43B was not justified and remitting the issue of interest under section 215 back to the CIT(A) for a specific finding.