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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 ..... eductable expenditure. There is no scope for such implications, when construing a taxing statute. Even, though, cess may be collected as a part of income tax, that does not render such cess , either rate or tax, which cannot be deducted in terms of the provisions in Section 40(a)(ii). The mode of collection, is really not determinative in such matters. 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. - Decided in favour of assessee. - TAX APPEAL NO.17 OF 2013 AND TAX APPEAL NO. 18 OF 2013 - - - Dated:- 28-2-2020 - M.S. SONAK NUTAN D. SARDESSAI, JJ. Mr. R. G. Ramani, Senior Advocate with Ms. Srushti Patil, Advocate for the Appellant. Ms. Susan Linhares, Standing Counsel for the Respondent. Jud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment Years. The substantial question of law No.(iii) in Tax Appeal No.17 of 2013 is also the only substantial question of law involved in Tax Appeal No.18 of 2013. For all these reasons, it is only appropriate for both these appeals are disposed of by a common judgment and order. 7. In so far as the substantial questions of law Nos. (i) and (ii) in Tax Appeal No.17 of 2013 are concerned, we note that the same arise in the context of the assessment for the Assessment Year 2008-2009. In fact, identical questions arose in relation to the Appellant Assessee for the Assessment Year 2009-2010, which is evident from the order of Income Tax Appellate Tribunal (ITAT) in ITA No.72/PNJ/2012 and ITA No.85/PNJ/2012. These questions have been set out as question Nos.(3) and (4) in the judgment and order dated 8th March, 2013 by which the said two appeals came to be disposed of by the ITAT. 8. The ITAT, upon detailed consideration of such questions has in fact held in favour of the Appellant Assessee and against the Respondent Revenue, in so far as the Assessment Year 2009-2010 is concerned. The ITAT has referred to the Circular number 723 dated 19th September, 1995 which deals w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce so as to obtain suitable direction for placing the matter before the Full Bench. Accordingly, the Full Bench was constituted to consider the following question of law :- Whether, while dealing with the allowability of expenditure under Section 40(a)(i) of the Income Tax Act, 1961, the status of a person making the expenditure has to be a non-resident before the provision to Section 172 of the Act can be invoked ? 12. The Full Bench, upon detailed consideration of the matter has answered the aforesaid question of law in favour of the Assessee and against the Revenue. In effect the Full Bench, has not agreed with the view taken by the Division Bench in Orient (Goa) Private Limited (supra). 13. As noted earlier, since, the ITAT in its impugned judgment and order dated 17th May, 2013, has solely relied upon Orient (Goa) Private Limited ( supra ) in order not to follow its own view, in respect of this very Appellant Assessee, in respect of Assessment Year 2009-2010, we feel that the substantial questions of law Nos.(i) and (ii) now framed in Tax Appeal No.17 of 2013, are required to be answered in favour of the Appellant Assessee and against the Respondent Revenue, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s that the expression does not include cess and therefore, the amounts paid towards cess are liable to be deducted in computing the income chargeable under the head profits and gains of business or profession . However, the Respondent Revenue contends that cess is also included in the scope and import of the expression any rate or tax levied and consequently, the amounts paid towards the cess are not liable for deduction in computing the income chargeable under the head profits and gains of business or profession . 18. In relation to taxing statute, certain principles of interpretation are quite well settled. In New Shorrock Spinning and Manufacturing Co. Ltd. Vs Raval, 37 ITR 41 (Bom.), it is held that one safe and infallible principle, which is of guidance in these matters, is to read the words through and see if the rule is clearly stated. If the language employed gives the rule in words of sufficient clarity and precision, nothing more requires to be done. Indeed, in such a case the task of interpretation can hardly be said to arise : Absoluta sententia expositore non indiget. The language used by the Legislature best declares its intention and must be acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he legislature could have easily included reference to cess in clause (ii) of Section 40(a) of the IT Act. The fact that the legislature has not done so means that the legislature did not intend to prevent the deduction of amounts paid by a Assessee towards the cess , when it comes to computing income chargeable under the head profits and gains of business or profession . 24. The legislative history bears out that the Income Tax Bill, 1961, as introduced in the Parliament, had Section 40(a)(ii) which read as follows : (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 25. However, when the matter came up before the Select Committee of the Parliament, it was decided to omit the word cess from the aforesaid clause from the Income Tax Bill, 1961. The effect of the omission of the word cess is that only any rate or tax levied on the profits or gains of any business or profession are to be deducted in computing the income chargeable under the head profits and gains of business or profession . Since the deletion of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tive history bears out that this expression was in fact to be found in the Income Tax Bill, 1961 which was introduced in the Parliament. However, the Select Committee recommended the omission of expression cess and consequently, this expression finds no place in the final text of the provision in Section 40(a)(ii) of the IT Act, 1961. The effect of such omission is that the provision in Section 40(a)(ii) does not include, cess and consequently, cess whenever paid in relation to business, is allowable as deductable expenditure. 29. In Kanga and Palkhivala's The Law and Practice of Income Tax (Tenth Edition), several decisions have been analyzed in the context of provisions of Section 40(a)(ii) of the IT Act, 1961. There is reference to the decision of Privy Council in CIT Vs Gurupada Dutta 14 ITR 100, where a union rate was imposed under a Village Self Government Act upon the assessee as the owner or occupier of business premises, and the quantum of the rate was fixed after consideration of the 'circumstances' of the assessee, including his business income. The Privy Council held that the rate was not 'assessed on the basis of profits' and was allowabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... surance (ITA No.1111 and 1112/PUN/2017 decided on 25th July, 2019) by the ITAT, Pune. 32. Again, Ms. Linhares, learned Standing Counsel for the Revenue was unable to say whether the Revenue had instituted the appeals in the aforesaid matters. Mr. Ramani, learned Senior Advocate for the Appellant submitted that to the best of his research, no appeals were instituted by the Revenue against the aforesaid decisions of the ITAT. 33. The ITAT, in the impugned judgment and order, has reasoned that since cess is collected as a part of the income tax and fringe benefit tax, therefore, such cess is to be construed as tax . According to us, there is no scope for such implications, when construing a taxing statute. Even, though, cess may be collected as a part of income tax, that does not render such cess , either rate or tax, which cannot be deducted in terms of the provisions in Section 40(a)(ii) of the IT Act. The mode of collection, is really not determinative in such matters. 34. Ms. Linhares, has relied upon M/s Unicorn Industries Vs Union of India and others, 2019 SCC Online SC 1567 in support of her contention that cess is nothing but tax and therefore, there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... grant such a deduction to the Appellant Assessee. She submits that this is what precisely held by the ITAT in its impugned judgments and orders and therefore, the same, warrants no interference. 38. Although, it is true that the Appellant Assessee did not claim any deduction in respect of amounts paid by it towards cess in their original return of income nor did the Appellant Assessee file any revised return of income, according to us, this was no bar to the Commissioner (Appeals) or the ITAT to consider and allow such deductions to the Appellant Assessee in the facts and circumstances of the present case. The record bears out that such deduction was clearly claimed by the Appellant Assessee, both before the Commissioner (Appeals) as well as the ITAT. 39. In CIT Vs Pruthvi Brokers Shareholders Pvt. Ltd. 349 ITR 336 , one of the questions of law which came to be framed was whether on the facts and circumstances of the case, the ITAT, in law, was right in holding that the claim of deduction not made in the original returns and not supported by revised return, was admissible. The Revenue had relied upon Goetze (supra) and urged that the ITAT had no power to all ..... X X X X Extracts X X X X X X X X Extracts X X X X
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