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TMI Blog2019 (11) TMI 269X X X X Extracts X X X X X X X X Extracts X X X X ..... o subsidiary company - HELD THAT:- As the issue is squarely covered in favour of the assessee by the decision of the coordinate bench, in assessee`s own case and there is no change in facts and law and the Revenue is unable to produce any material to controvert the aforesaid findings of the Division Bench (supra). We find no reason to interfere in the said order of the Division Bench, therefore, respectfully following the judgment of the Coordinate Bench in assessee s own case wherein the Division Bench of this Tribunal noticed in the additional evidences that the assessee has computed credit rating of Taga Australia at BBB and Tega US at AA by applying scientific and logical method, and submitted before this Tribunal additional evidences and directed ld. TPO/A.O for fresh examination. Accordingly, we also direct the ld. TPO/Assessing Officer to examine credit rating of Taga Australia at BBB and Tega US at AA which was computed by assessee by applying scientific and logical method. Therefore we restore this issue to the file of the TPO/AO with the direction to ascertain the arm`s length price of the loan. Therefore grounds raised by Revenue are dismissed. Disallowan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the judgment of this Coordinate Bench in the case of ITC Limited [ 2019 (4) TMI 1574 - ITAT KOLKATA] we allow the claim of the assessee. - ITA Nos. 1047,1048 & 1049/Kol/2017, C.O Nos.31, 32 & 33/Kol/2019 (A/o IT A No.1047,1048 & 1049/Kol/2017) - - - Dated:- 31-10-2019 - Shri A.T. Varkey, JM And Dr. A. L. Saini, AM For the Appellant : DR. P. K. Srihari, CIT-DR For the Respondent : Shri Chidambaram, Advocate ORDER PER DR. ARJUN LAL SAINI, AM: The captioned three appeals filed by the Revenue and three Cross Objections filed by the assessee pertaining to Assessment Years 2009-10, 2010-11 2011-12, are directed against separate orders passed by ld. Commissioner of Income Tax (Appeals)- 22, Kolkata in Appeal No.212/CIT(A)-22/09-10/14-15/Kol, 52/CIT(A)-22/10-11/14- 15/Kol 55/CIT(A)-22/11-12/15-16/Kol; respectively, which in turn arise out of separate fair assessment orders passed by the Assessing Officer, which incorporate the findings of the Transfer Pricing Officer under section 92CA(3) of the Income Tax Act 1961 (hereinafter referred to as the Act ). 2. Although, these a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the Revenue in Assessment Year 2009-10 and Ground No.2 to 4 raised by the Revenue in Assessment Year 2010-11 and Ground Nos.2 to 4 raised by the Revenue in Assessment Year 2011-12. 4. When this appeal was called out for hearing, learned counsel for the assessee invited our attention to the order dated 21.09.2016, passed by the Division Bench of this Tribunal in assessee s own case in ITA No.1912/Kol/2012, for the Assessment Year 2008-09 whereby the issue relating to Corporate Guarantee Fee has been discussed and adjudicated in favour of assessee. Learned Counsel for the assessee submitted before the Bench that the present issue, relating to corporate guarantee fee is squarely covered by the aforesaid order of the Tribunal, a copy of which was also placed before the Bench. 5. Learned Departmental Representative relied upon the orders of the TPO/AO. 6. We see no reasons to take any other view of the matter than the view so taken by the Division Bench of this Tribunal in assessee s own case vide order dated 21.09.2016. In this order, the Tribunal has inter alia observed as follows: 5.Issue No.2:Corporate Guarante ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... delines or international case law referred above appears to have been brought to the notice of the Hon'ble Tribunal. 38. The Hon'ble Supreme Court has laid out on many occasions that unless an issue or decision has been discussed in detail in a judicial pronouncement it cannot make good law. In the case of Shanmugavel Nadar V. State of Tamil Nadu. Another (263 ITR 658), the Apex Court has pronounced the following : Rup Diamonds V. Union of India, AIR 1989 SC 674, is an authority for the proposition that apart altogether from the merits of the grounds for rejection, the mere rejection by a superior forum, resulting in refusal of exercise of its jurisdiction which was invoked, could not by itself be construed as the imprimatur of the superior forum on the correctness of the decisions sought to be appealed against. In Supreme Court Employees Welfare Association V. Union of India, AIR 1990 SC 334. this Court observed that a summary dismissal, without laying down any law, is not a declaration of law envisaged by Article 141 of the Constitution. When reasons are not given, the decision of the Supreme Court becomes one which attracts article 141 of the Constitu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntor and the borrower in an arm's length situation. However, the bargaining power of TILB vis-a-vis the assessee is minimal in an arm s length situation. Thus, 250 bps could be safely considered the price of the guarantee. 42.Based on the above, it is held that the assessee should have charged a Guarantee commission at the annual rate of 2.5% on the amount of credit availed by the subsidiary which was guaranteed by it. The loan amount stood at ₹ 3,60,39,150/- as on 31.03.2008. Accordingly, the guarantee fee is computed at ₹ 9,00,979/-. Thus, the total income of the assessee is to be upwardly adjusted by this amount. 5.1. Aggrieved from the order of the TPO, the assessee filed an application before the Hon ble DRP. The Hon ble DRP has also confirmed the action of the TPO by observing the following: 5.1.6 The Assessee has submitted in the reply to the remand report that from the facts as already presented and discussed before the Ld. Panel Members vide submission dated 14.06.2012, it is evident that the purpose of setting up of the SPV (Tega Bahamas) was to facilitate the acquisition of the South African entities. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ernational transactions entered in to by the Assessee with the AE, we find that they are interest free loan and Corporate Guarantee given to ICICI UK bank,on behalf of the AE. If this is the structure of the transactions, then the Assessee must charge interest on loan and Guarantee fee from AE. If Assessee does not do so it leads to erosion of tax base as third parties charge interest and fees for such services. Therefore, this Panel holds the view that the TPO was right in making adjustment in the TP Order on this account. There is no scope in our view to restructure the international transaction of interest free loan as Shareholder service or quasi-equity. Restructuring should be the judicious discretion of the Tax Administration and it could be applied only if the Assessee had claimed expenditure for interest or fees on Guarantee. In this case facts are different and interest and Guarantee fees adjustment made by the TPO are in the nature of income and not expenditure. Being aggrieved from the order of the Hon,ble DRP, the assessee is in further appeal before us. 5.2 The ld. Authorised Representatives for the assessee has submitted that: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. The assessee is of the view that as the purpose of setting up of Tega Bahamas was to facilitate the acquisition of the South African entities, its expectation from the loan funds provided to Tega Bahamas and the guarantee provided for the third party borrowings of Tega Bahamas was not to earn an interest income or a guarantee fee. The assessee believes that in a third party scenario no entity would have lent any funds to Tega Bahamas given its skewed debt - equity ratio evident from its balance sheet and thus, the basis of providing funds to Tega Bahamas was as an investment and not as loan. Thus, it would be appropriate to classify the funds loaned and guarantee provided to infuse third party funds as quasiequity in nature and as a shareholder service meriting no consideration. vi. The assessee has referred to UK Manual INTM 501010 issued by HMRC which deals with the case of a UK lender and guarantor. The assessee has then mentioned that the UK Transfer Pricing Legislation further provides guidance as to how one could decide whether a loan or a guarantee provided for a loan is quasi-equity in nature or a shareholder service. This assertion is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . However, the assessee has cited the full Ruling and suggested that clauses (c) (d) and (g) of paragraph 60 of the Ruling allows for recharacterisation of loan as equity. xiii. It is mentioned that the TPO has rejected the arguments of the assessee by stating that 'thin capitalisation' rules are not provided in Indian legislation. The assessee has stressed that thin capitalization rules stem from the arm's length principle and they were introduced across the world to check lop-sided capital structures that were employed by multinational corporations to enable profit extraction from their AEs in the form of interest . The assessee has referred to HMRC INTM 542005 where it has been mentioned that thin capitalization is a form of transfer pricing. Based on the above, the ld.AR for the assessee has submitted before us that the TPO's determination of arm's length price of the guarantee fee is erroneous. Ld. AR also submitted that assessee`s expectation from provision of loan and guarantee are not that of a lender or guarantor i.e. to earn a market rate of interest or guarantee fee, rather, the expectation was of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsidered view, the way forward, to avoid such issues being litigated and to ensure satisfactorily resolution of these disputes, must include a clear and unambiguous legislative guidance on the transfer pricing implications of the corporate guarantees as also on the methodology of determining its ALP, if necessary. Of course, no matter how good is the legislative framework, the importance of a very comprehensive analysis, in the transfer pricing study, of the nature of corporate guarantees issued by the assesses, can never be overemphasized. The sweeping generalizations, vague statements and evasive approach in the transfer pricing study reports, which are quite common in most of the transfer pricing reports, cannot do good to a reasonable cause. When judicial calls on the complex transfer pricing issues are to be taken, utmost clarity in the legislative framework and a comprehensive analysis of relevant facts, in the transfer pricing documentation, are basic inputs. Unfortunately, both of these things leave a lot to be desired. ITAT can only hope, and ITAT do hope, that things will change for better. (PARA51) Based on the above cited facts and cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment Year 2009-10 and Ground No.5 and 6 raised by the Revenue for Assessment Year 2010-11, and Ground No.5 raised by the Revenue in Assessment Year 2011-12. 9. When this appeal was called out for hearing, learned counsel for the assessee invited our attention to the order dated 21.09.2016, passed by the Division Bench of this Tribunal in assessee s own case in ITA No.1912/Kol/2012, for the Assessment Year 2008-09 whereby the transfer pricing issue relating to attribution of additional interest on loan given to subsidiary ( that is, the Transfer Pricing Adjustment on account of interest on loan given to subsidiary) has been discussed and adjudicated in favour of assessee. Learned counsel for the assessee submitted that the present issue in assessee`s appeal is squarely covered by the aforesaid order of the Tribunal, a copy of which was also placed before the Bench. 10. Learned Departmental Representative relied upon the orders of the TPO/AO. 11. We see no reasons to take any other view of the matter than the view so taken by the Division Bench of this Tribunal in assessee s own case vide order dated 21.09.2016. In this ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lia would not be more then 'B'. The Ld. TPO has only placed reliance on four out of seven ratios as prescribed by the S P Criteria to arrive at the credit rating for AEs even after acknowledging the fact that S P prescribes all seven ratios. Ld. TPO has identified a single loan transaction as comparable from 'Loan Connector' having 'B' rating commanding a spread of 3% for the risks associated with its rating therefore, we find that the methodology adopted by the TPO may be wrong. However, the assessee has submitted before us some additional evidence pertaining to credit rating. As we noticed in the additional evidences that the assessee has computed credit rating of Taga Austrialia at BBB and Tega US at AA by applying scientific and logical method, as explained above, and submitted before us additional evidences, accordingly, we are of the view that this issue requires fresh examination at the end of the TPO/AO, therefore we restore this issue to the file of the TPO/AO with the direction to ascertain, the arm`s length price of the loan. 4.5 In the result, the appeal filed by the assessee on this ground i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DR for the Revenue has primarily reiterated the stand taken by the Assessing Officer, which we have already noted in our earlier para and the same is not being repeated for the sake of brevity. On the other hand, the ld. Counsel for the assessee defended the order passed by the ld. CIT(A). 17. We have heard both the parties and perused the materials available on record. We note that the issue raised by the revenue in respect of disallowance u/s 14A r.w.r 8D of the Income Tax Rules is no longer res integra. We note that Coordinate Bench of ITAT, Kolkata in the case of REI Agro vs. DCIT, 144 ITD 141 (Kol-Trib) has held that it is only the investments which yielded dividend during the previous year that has to be considered while adjudicating the average value of investment for the purpose of Rule 8D(2)(ii) and (iii) of the Rules. The aforesaid view of the Tribunal has since been affirmed as correct by the Hon ble Calcutta High Court in GA No.3581 of 2013 in the appeal against the order of the Tribunal in the case of REI Agro Ltd. (supra). We note that in assessee s case, the assessee has not disallowed any expenditure under Rule 8D(2)(i), as there was no direct expens ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addition made by the Assessing Officer. 1. I have carefully considered the submissions of the assessee-company, and also the discussions made by the Ld. AO in the impugned order. In Para 4.1 of the impugned order, the Ld. AO observed that in its P L A/c, the assessee had debited ₹ 4,74,97,275/- as loss from option contracts in foreign currency with banks. When asked to clarify why such loss be allowed, the assessee-company stated that option contracts were entered into to offset future risks that might arise in the course of its export business and therefore should be allowed as a business loss. Referring to provisions of Section 43(5) which defines 'speculative transaction' for the purposes of assessment of business profits, the AO held that options contract in foreign currency with bank was not covered by any of the four exceptions provided in the Explanation under Section 43(5) of the Act. With merely such remarks, the Ld. AO disallowed loss of ₹ 4,74,97,275/- holding it as speculative loss and did not allow its set off in assessment of appellant's business income for the relevant year. However, quite on the contrary, I find that in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpressly stated as follows: The following structure has been done to hedge your underlying exports. You agree to sign all the relevant documents and provide the details of the underlying. The client acknowledges that AXIS Bank Ltd has explained each element of the transaction and it is a sophisticated investor who has the ability to understand the terms conditions of transactions and familiarized himself with above terms conditions and has entered into such a transaction for hedging purposes and not as a speculative activity. The company has suitable and adequate underlying exposures to hedge through the deal and will execute and sign the relevant documents. 3. Similar affirmations were there in the agreement with Citibank. The relevant portions of the contract were as follows: The Transaction has been booked against the exposure referred to below, details of which have been provided by the Counterparty's authorized employees to the Treasury Marketing Officer of Citibank. Party B represents and warrants to Citibank on the date on which it enters into the Transaction that: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he extant provisions of FEMA, did not permit the private parties other the Banks and Financial Institutions to conduct proprietary trading in foreign currency. Under the relevant provisions of FEMA, the Indian residents are permitted to enter into forward contracts in foreign currency or option contracts only when they can prove that such transactions are being entered into for the purposes of managing borrowings or investments or for the purpose of hedging the underlying assets or liabilities or in connection with line of business and not otherwise. In the present case, the documents on record establish that the appellant-company was having substantial exposure to international trade. The assessee was regularly exporting and earning income in foreign currencies such as US dollars, Euros, Australian Dollars etc. The export sales turnover for the year was in excess of ₹ 110 crores. The appellant was having a continued foreign currency exposure because the appellant had sufficient export orders in hand which were to be executed in the subsequent accounting years as well. Having regard to these underlying facts, it was evident that the assessee had substantial e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pect of the export orders received of equivalent amount from Tega Beruc South Africa Pty Ltd. From these facts, I find that the option contracts which the appellant entered with the Banks were backed by the export orders received by the appellant from its foreign customers in the course of its business of manufacture export of engineering goods. 9. It further transpired that forward contracts were having different maturity periods. The option contracts were executed in a manner whereby an individual contract's maturity would coincide with the realization of export sale proceeds by the appellant. In support, the appellant furnished details of matured/cancelled option contracts vis-a-vis the details of export proceeds realized correspondingly. From the details furnished, it appears that the option contracts which matured and got cancelled were closely connected with the export realization. For example, on 04.07.2008, the option contract of USD 2,00,000. Prevailing equivalent was to mature at a strike price of ₹ 40.25/$. In the same month, the appellant had export realization of USD 2,00,000. Prevailing exchange rate at which the monies were actually recei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess of export of industrial goods and the transactions were not in foreign currency simplicitor as alleged in the assessment order. 12. The issue as to whether the loss incurred by an assessee in foreign currency forward contracts or option contracts executed against underlying assets in the form of foreign currency receivables or payables has engaged attention of various judicial forums for long. In international trade, obtaining foreign currency forward contracts or entering into foreign currency derivatives is a standard business practice which is resorted to guard against likely losses arising from adverse exchange rate fluctuations. The Hon'ble jurisdictional Calcutta High Court had considered this issue in the case of CIT Vs Soorajmull Nagarmull (129 ITR 169). In that case the assessee firm was carrying on business of export and import of jute goods. With a view to hedge its international trade, the assessee executed foreign exchange forward contracts which were partly used against the imports made and the unutilized contracts were cancelled and by paying the difference. The AO disallowed the loss incurred on cancellation on the ground that such loss was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (a) a contract in respect of raw materials or merchandise entered into by a person in the course of his manufacturing or merchanting business to guard against loss through future price fluctuations in respect of his contracts for actual delivery of goods manufactured by him or merchandise sold by him; or (b) a contract in respect of stocks and shares entered into by a dealer or investor therein to guard against loss in his holdings of stocks and shares through price fluctuations; or (c) a contract entered into by a member of a forward market or a stock exchange in the course of any transaction in the nature of jobbing or arbitrage to guard against loss which may arise in the ordinary course of his business as such member; shall not be deemed to be a speculative transaction. Here there is no finding that entering into foreign exchange contract was the nature of the business of the assessee. This was only an incidental part of the business operation for the export and import of the goods by the assessee. The assessee was not a dealer in foreign exchange contracts as such. Foreign exchange contracts were only incidental ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, it was held that the receipt was not a receipt from a speculative transaction as defined in Expln. 2 and the money received was not liable to be set off against speculation loss of earlier years. This view has been consistently followed by this court. Reference may be made to the decision in the case of C1T v. Ramjeevan Sarawgee Sons [1977] 107 ITR 845, where this court also considered the decision of the Supreme Court in the case of Davenport Co. P. Ltd. v. CIT [1975] 100 ITR 715, on which reliance was placed on behalf of the revenue and it was distinguished. We are in respectful agreement with the observations of Mr. Justice Sen in that case at p. 849 of the report in so far as it distinguished the decision of the Supreme Court in the case of Davenport Co. P. Ltd. [1975] 100 ITR 715. We may also refer to the decision of this court in the case of CIT v. Arun General Industries Ltd. [1977] 110 ITR 286, where all these previous decisions of this court have been noted. Except the Madras High Court in the case of R. Chinnaswami Chettiar v. CIT [1974] 96 ITR 353, all other High Courts have taken a similar view. The decision of the Supreme Court in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e called upon to explain the nature of its transactions. Thus, the submission now being made is without any foundation as the stand of the assessee on facts was never disputed. So far as the reliance on Accounting Standard-11 is concerned, it would not by itself determine whether the activity was a part of the Respondent-assessee's regular business transaction or it was a speculative transaction. On present facts, it was never the Revenue's contention that the transaction was speculative but only disallowed on the ground that it was notional. Lastly, the reliance placed on the decision in S. Vinodkumar (supra) in the Revenue's favour would not by itself govern the issues arising herein. This is so as every decision is rendered in the context of the facts which arise before the authority for adjudication. Mere conclusion in favour of the Revenue in another case by itself would not entitle a party to have an identical relief in this case. In fact, if the Revenue was of the view that the facts in S. Vinodkumar (supra) are identical / similar to the present facts, then reliance would have been placed by the Revenue upon it at the hearing before the Tribunal. The impugned or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or supply of cotton to Bangaldesh was upto 22.1.2009. Since the contract was cancelled by communication dated 24.10.2008, the Bank intimated the Assessee that in view of the adverse fluctuation of Euro currency, the Assessee had to bear the loss of ₹ 1,56,80,527 because the booking rate as on 17.7.2008 was 1.5711 the cancellation date was 22.1.2009 on which date the rate was 1.2613. Thus the Assessee suffered a loss on the forward contract in question. From the sample case set out above it is clear that the forward contract in question was purely hedging transactions entered into by the Assessee to safeguard against loss arising out of fluctuation in foreign currency. Such transactions have been held in the following cases to be not speculative transactions falling within the ambit of Sec.43(5) of the Act, CIT Vs. Soorajmull Nagarmull (1981) 5 Taxman 289 (Cal), CIT Vs, Badridas Gauridu (P) Ltd., (2004) 134 Taxman 376 (Bom), CIT Vs. Friends and Friends Shipping Pvt.Ltd., Tax Appeal No.251 of 2010 dated 23.8.2011 and CIT Vs. Panchmahal Steel Ltd. Tax Appeal No.131 of 2013 dated 28.3.2013 by the Hon'ble Gujarat High Court. The conclusions of the CIT(A) on this issue, in our ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to cancellation of the forward contracts partially or fully, the assessee had to pay the difference between the contract rate and the market rate to the bank. Such payment was a business loss incurred by the assessee in course of its export business and is Jayant Kr. Bhura AY 2000-10 an allowable deduction. The assessee had filed before the AO copies of all the 16 material export orders in the forward contracts relating to which loss of ₹ 3,78,44,872/- was incurred in support of his contention that forward contracts were made on the basis of export orders in hand. The purported findings of the AO that the assessee had not submitted the export orders or that forward contracts were booked without having export orders in hand are contrary to the record. The assessee has since obtained from the AO certified copies of the export orders filed by him in course of the assessment proceedings which bear out the assessee's contention. Even AO has not correctly prepared Annexures A and B to the Assessment order as he has omitted to incorporate in the said Annexures the details of the export orders in respect of which the forward contracts were booked. As such, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were only incidental to the assessee's regular course of business and the loss was thus not a speculative loss but incidental to the assessee's business and allowable as such. Facts in the present case are very similar. Admittedly, the assessee is not a dealer in foreign exchange. For the purpose of hedging the loss due to fluctuation in foreign exchange while implementing the export contracts, the assessee had entered into forward contract with the banks. In some cases, the export could not be executed and the assessee had to pay certain charges to the Bank and thereby incurred certain expenses. These expenses the assessee claimed by way of expenditure towards business. Accordingly, Hon'ble High Court held that the transaction can be stated to be in speculation as to cover under sub-section (5) of section 43 of the Act. 11. Further, this issue is also covered by the judgment of Hon'ble Bombay High Court in CIT v Badridas Gauridu (P) Ltd., (2003) 261 JTR 256 (Bom), wherein, the judgment of the Hon'ble Calcutta High Court was followed. To quote from the judgment of the Hon'ble Bombay High Court (at pages 257-8 of 261 HR) : T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is squarely applicable to the appellant's case. As per the transactional documents, it was evident that the assessee had entered into foreign exchange option contracts to guard against exchange fluctuation risks associated with realization of export sale proceeds. In the option contracts the Bank categorically stated that the contracts were entered into against underlying in form of export orders. The evidence on record also establish that during the contractual period when the options matured, the appellant had executed expoft orders and also export proceeds were realized. Export sales were realized at the exchange rates prevailing at the time of realization. The export sales realization was made at exchange rates higher than contracted rates with Banks and therefore the assessee had opted to realize the export value at the prevailing rates instead of the option rates. The higher realization of exports was credited in the P L A/c in the form of export sales. However, upon termination of option, the assessee settled the contracts by paying the premium claimed it as loss on option contracts. These transactional documents therefore lead only to one conclusion i.e. the option c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition, we condone the delay and admit these cross objections filed by assessee. 25. After giving our thoughtful consideration to the submissions of the parties and perusing the judicial decisions relied upon by the ld. Counsel for the assessee. We note that the education cess is allowable for deduction u/s 37(1) of the Act. For this, we rely on the judgment of the Coordinate Bench of ITAT Kolkata in the case of ITC Limited vs. ACIT in ITA No.685/Kol/2014, for A.Y.2009-10, order dated 27.11.2018 wherein it was held as follows: 12. The assessee s additional last/ substantive ground avers that it is entitled for the educations secondary higher education cess as overhead deduction amounting to ₹ 423618317.0 u/s 37 of the Act. We note that hon ble Rajasthan high court s decision in DB Income Tax Appeal No. 52/Kol/2018 M/s Chambal Fertilizers Ltd. vs. DCIT decided on 31.07.2018 takes into account CBDT circular dated 18.05.1967 for holding such cess(es) to be allowable as deduction. Their lordships hold that section 40a(ii) applies only on taxes such than earn cess(es). We therefore reject the Revenue s contentions supporting the impugned disallowance ..... X X X X Extracts X X X X X X X X Extracts X X X X
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