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TMI Blog2020 (3) TMI 347X X X X Extracts X X X X X X X X Extracts X X X X ..... the non-resident buyers of iron ore, which demurrage has been accepted by the Tribunal as taxable u/s. 172 of the Act, could be considered as covered by the decision of the Hon'ble High Court in the case of Orient Goa P. Ltd. (Supra) considering that in the said decision, the Hon'ble High Court had observed that there were no pleadings or material brought on records to show that the case is governed by occasional shipping within the meaning of section 172 of the Act, and that the said section applies. ii. Whether on fact and in the circumstances of the case, the issue about the Appellants claim that the demurrage paid to the non-resident buyers of iron ore in terms of the relevant sales contract was not the income accrued or arisen to the said non-resident buyers in India within the meaning of section 5(2) (b) read with Explanation 1(b) to section 9(1) (i) of the Act, could be considered as covered by the decision of the Hon'ble High Court in the case of Orient Goa P. Ltd. (supra). iii. Whether on the facts and in the circumstances of the case and in law, the Education Cess and Higher and Secondary Education Cess is allowable as a deduction in the year of payment." ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessment Year 2009-2010, when it came to assessment in the Assessment Year 2008-2009. However, in its judgment and order dated 17th May, 2013 in ITA No.89/PNJ/2012, which is the impugned judgment and order in the Tax Appeal No.17 of 2013, ITAT felt itself obliged to follow the decision of the Division Bench of this Court in CIT Vs Orient (Goa) Co. Pvt. Ltd. reported in 3 Vol. 325 ITR 554 and on such basis answered the ground Nos. 5 and 6 set out in ITA No.89/PNJ/2012, against the Appellant - Assessee and in favour of the Respondent -Revenue. 10. Mr. R. G. Ramani, learned Senior Advocate appearing for the Appellant has now placed reliance upon the decision of the Full Bench of this Court in Income Tax Appeal No.989 of 2015 and connected matters disposed of on 5th February, 2016. He submits that the Full Bench has held that Orient (Goa) Private Limited ( supra ) was not correctly decided and stands overruled by the decision of the Full Bench. He therefore submits that the view taken by the ITAT itself, in relation to the Assessment Year 2009-2010, which was not even challenged by the Respondent - Revenue, in case of this very Appellant - Assessee, is required to be restored, in s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Secondary Education Cess, collectively referred to as "cess" is allowable as a deduction in the year of its payment ?'. 16. The aforesaid question arises in the context of provisions of Section 40(a)(ii) which inter alia provides that notwithstanding anything to the contrary in sections 30 to 38 of the IT Act, the following amounts shall not be deducted in computing the income chargeable under the head "Profits and gains of business or profession", - (a) in the case of any assessee - (ia)........................... (ib)................................ (ic) ............................... (ii) any sum paid on account of any rate or tax levied on the profits or gains of any business or profession or assessed at a proportion of, or otherwise on the basis of, any such profits or gains. [Explanation 1.-For the removal of doubts, it is hereby declared that for the purposes of this sub-clause, any sum paid on account of any rate or tax levied includes and shall be deemed always to have included any sum eligible for relief of tax under section 90 or, as the case may be, deduction from the Indian income-tax payable under section 91.] [Explanation 2.-For the removal of dou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rly at the language used. No tax can be imposed by inference or analogy. It is also not permissible to construe a taxing statute by making assumptions and presumptions [See Goodyear Vs State of Haryana 188 ITR 402(SC)]. 21. There are several decisions which lay down rule that the provision for deduction, exemption or relief should be interpreted liberally, reasonably and in favour of the assessee and it should be so construed as to effectuate the object of the legislature and not to defeat it. Further, the interpretation cannot go to the extent of reading something that is not stated in the provision [See AGS Tiber Vs CIT 233 ITR 207]. 22. Applying the aforesaid principles, we find that the legislature, in Section 40(a)(ii) has provided that "any rate or tax levied" on "profits and gains of business or profession" shall not be deducted in computing the income chargeable under the head "profits and gains of business or profession". There is no reference to any "cess". Obviously therefore, there is no scope to accept Ms. Linhares's contention that "cess" being in the nature of a "Tax" is equally not deductable in computing the income chargeable under the head "profits and gains ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of the Income Tax Bill, 1961 as introduced in the Parliament stood as under:- "(ii) any sum paid on account of any cess, rate or tax levied on the profits or gains of any business or profession or assessed at a proportion of, or otherwise on the basis of, any such profits or gains". When the matter came up before the Select Committee, it was decided to omit the word 'cess' from the clause. The effect of the omission of the word 'cess' is that only taxes paid are to be disallowed in the assessments for the years 1962-63 and onwards. 3. The Board desire that the changed position may please be brought to the notice of all the Income Tax Officers so that further litigation on this account may be avoided.[Board's F. No.91/58/66-ITJ(19), dated 18-5-1967.] 27. The CBDT Circular, is binding upon the authorities under the IT Act like Assessing Officer and the Appellate Authority. The CBDT Circular is quite consistent with the principles of interpretation of taxing statute. This, according to us, is an additional reason as to why the expression "cess" ought not to be read or included in the expression "any rate or tax levied" as appearing in Section 40(a)(ii) of the IT A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the basis of business profits may be allowed in computing such profits under this Act. 30. The Division Bench of the Rajasthan High Court (Jaipur Bench) in Income Tax Appeal No.52/2018 decided on 31st July, 2018 (Chambal Fertilisers and Chemicals Ltd. Vs CIT Range-2, Kota ), by reference to the aforesaid CBDT Circular dated 18th May, 1967 has held that the ITAT erred in holding that the "education cess" is a disallowable expenditure under Section 40(a)(ii) of the IT Act. Ms. Linhares was unable to state whether the Revenue has appealed this decision. Mr. Ramani, learned Senior Advocate submitted that his research did not suggest that any appeal was instituted by the Revenue against this decision, which is directly on the point and favours the Assessee. 31. Mr. Ramani, in fact pointed out three decisions of ITAT, in which, the decision of the Rajasthan High Court in Chambal Fertilisers and Chemicals Ltd.(supra) was followed and it was held that the amounts paid by the Assessee towards the 'education cess' were liable for deduction in computing the income chargeable under the head of "profits and gains of business or profession". They are as follows :- (i) DCIT Vs Peer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds such cess or NCCD did not qualify for exemption under the exemption Notification. This view of the High Court was upheld by the Apex Court in Unicorn Industries (supra ). 36. The aforesaid means that the Supreme Court refused to regard the levy of education cess, higher education cess and NCCD as "duty of excise" when it came to construing exemption Notification. Based upon this, Mr. Ramani contends that similarly amounts paid by the Appellant - Assessee towards the "cess" can never be regarded as the amounts paid towards the "tax" so as to attract provisions of Section 40(a)(ii) of the IT Act. All that we may observe is that the issue involved in Unicorn Industries ( supra ) was not at all the issue involved in the present matters and therefore, the decision in Unicorn Industries ( supra ) can be of no assistance to the Respondent - Revenue in the present matters. 37. Ms. Linhares, learned Standing Counsel for the Revenue however submitted that the Appellant - Assessee, in its original return, had never claimed deduction towards the amounts paid by it as "cess". She submits that neither was any such claim made by filing any revised return before the Assessing Officer. She the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... placed by the ITAT also makes it clear that the issue involved in the said case was limited to the power of the assessing authority and does not impinge on the powers of the ITAT under section 254 of the said Act. This means that in Goetze (supra), the Hon'ble Apex Court was not dealing with the extent of the powers of the appellate authorities but the observations were in relation to the powers of the assessing authority. This is the distinction drawn by the division Bench in Pruthvi Brokers (supra) as well and this is the distinction which the ITAT failed to note in the impugned order. 41. Besides, we note that in the present case, though the claim for deduction was not raised in the original return or by filing revised return, the Appellant - Assessee had indeed addressed a letter claiming such deduction before the assessment could be completed. However, even if we proceed on the basis that there was no obligation on the Assessing Officer to consider the claim for deduction in such letter, the Commissioner (Appeals) or the ITAT, before whom such deduction was specifically claimed was duty bound to consider such claim. Accordingly, we are unable to agree with Ms. Linhare ..... X X X X Extracts X X X X X X X X Extracts X X X X
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