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TMI Blog2021 (5) TMI 241X X X X Extracts X X X X X X X X Extracts X X X X ..... e Assessee : Shri Kirit Kamdar For the Revenue : Shri Tharian Oommen (DR) ORDER PER AMARJIT SINGH, JM: The assessee has filed the present appeal against the order dated 23.04.2019 passed by the Commissioner of Income Tax (Appeals)-08, Mumbai [hereinafter referred to as the CIT(A) ] relevant to the A.Y.2014-15. 2. The assessee has raised the following grounds of appeal: - Disallowance under section 14A in respect of expenditure attributable to earning exempt income: 1. On the facts and in the circumstances of the case and in law, the Commissioner of Income- tax (Appeals) erred in upholding the disallowance under section 14A computed at 0.5% of the average value of investments other than the investments which have yielded exempt income. 2. On the facts and in the circumstances of the case and in law, the Commissioner of Income- tax (Appeals) erred in not appreciating the fact that the appellant had already computed the disallowance under section 14A at ₹ 1,55,774 on a reasonable basis. 3. On the facts and in the circumstances of the case and in law, the Commissioner of Income- tax (Appeals) erred in upholding the action of the Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of ₹ 1,55,774/-. The total expenses were assessed to the tune of ₹ 24,79,196/- The total income of the assessee was assessed to the tune of ₹ 4,63,74,796/-. Feeling aggrieved, the assessee filed an appeal before the CIT(A) who partly allowed the claim of the assessee, but the assessee was not satisfied, therefore, the assessee has filed the present appeal before us. ISSUE NOs. 1 to 7 4. All the grounds are in connection with the confirmation of disallowance u/s 14A r.w. Rule 8D of the Rules. At the very outset, the Ld. Representative of the assessee has argued that while assessing the expenditure to earn the exempt income in view of the provisions u/s 14A r.w. 8D(2) of the Rules, investment which was not attributable to the exempt income is liable to be excluded and in this regard, the Ld. Representative of the assessee has placed reliance upon the decision of the Hon ble Delhi High Court in the case of ACIT Vs. Vireet Investment P. Ltd. (2017) 82 taxmann.com 415 (Del). However, on the other hand, the Ld. Representative of the assessee has strongly relied upon the order passed by the CIT(A) in question. The relevant finding has been given in para no. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Chapter IV of the Act begins with the phrase for the purposes of computing the total income under this Chapter . It was pointed out that income under the normal provisions of the Act is computed under the five heads specified in section 14. Provisions relating to computation of income under different heads are contained in sections 14 to 59, forming part of Chapter IV of the Act. In other words, the said Chapter provides for computation of income of an assessee under the normal provisions of the Act. As a necessary corollary, provisions of section 14A cannot be extended to any Chapter, other than Chapter IV of the Act. 4.13. Section 115JB finds place under Chapter XII-B of the Act. Being so, provisions of sec. 14A contained in Chapter IV cannot be imported and incorporated u/s 115JB more so when clause (f) to Explanation 1 to the said section contains no reference to section 14A of the Act. 4.14. Ld. counsel submitted that if provisions of Sec. 14A are to be imported into section 115JB of the Act, the same would tantamount to reading additional words into the statute which is not permissible and would be against the cardinal rule of literal interpretation‟. In this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id not yield exempt income is liable to be excluded while assessing the expenditure to earn the exempt income u/s 14A r.w. Rule 8D(2). Accordingly, we set aside the finding of the CIT(A) in question and direct the AO to assess the expenditure to earn the exempt income while implementing the decision titled as ACIT Vs. Vireet Investment P. Ltd. (2017) 82 taxmann.com 415 (Del). Accordingly, these issues are decided in favour of the assessee against the revenue. ISSUE NO. 8 6. Under this issue the assessee has challenged the disallowance of Education Cess while assessing the income tax paid during the year. At the very outset, the Ld. Representative of the assessee has argued that the deduction in respect of Education Cess is liable to be given while assessing the income of the assessee and in this regard, the Ld. Representative of the assessee has placed reliance upon the decision passed by the Hon ble Bombay High Court in the case of Sesa Goa 423 ITR 426. The relevant finding is hereby reproduced as under.:- 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 eff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case may be, deduction from the Indian income-tax payable under section 91.] [Explanation 2.-For the removal of doubts, it is hereby declared that for the purposes of this subclause, any sum paid on account of any rate or tax levied includes any sum eligible for relief of tax under section 90A;] 17. Therefore, the question which arises for determination is whether the expression any rate or tax levied as it appears in section 40(a)(ii) of the IT Act includes cess . The Appellant - Assessee contends 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 Mfg. Co. Ltd. v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 Ta x is equally not deductable in computing the income chargeable under the head profits and gains of business or profession . Acceptance of such a contention will amount to reading something in the text of the provision which is not to be found in the text of the provision in section 40(a)(ii) of the IT Act. 23. If the legislature intended to prohibit the deduction of amounts paid by a Assessee towards say, education cess or any other cess , then, the 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 Ta x 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity. 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 Act. 28. In the Income-tax Act, 1922, section 10(4) had banned allowance of any sum paid on account of 'any cess, rate or tax levied on the profits or gains of any business or profession'. In the corresponding Section 40(a)(ii) of the IT Act, 1961 the expression cess is quite conspicuous by its absence. In fact, legislative 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt 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) Dy. CIT v. Peerless General Finance and Investment and Co. Ltd. [IT Appeal No. 1469 and 1470/Kol/2019 decided on 5-12-2019 by the ITAT, Calcutta; (ii) Dy. CIT v. Graphite India Ltd. [IT Appeal No. 472 and 474 Co. No. 64 and 66/Kol/2018 dated on 22-11- 2019)by the ITAT, Calcutta; (iii) Dy. CIT v. Bajaj Allianz General Insurance [IT Appeal No. 1111 and 1112/PUN/2017 dated on 25-7-2019) 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 therefore relied upon the decision of the Supreme Court in Goetze (India) Ltd. v. CIT [2006] 284 ITR 323/157 taxman 1 (SC) to submit that the Assessing Officer, was not only quite right in denying such a deduction, but further the Assessing Officer had no power or jurisdiction to 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turn, 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's contention based upon the decision in Goetze India Ltd. (supra). 42. For all the aforesaid reasons, we hold that the substantial question of law No. (iii) in Tax Appeal No. 17 of 2013 and the sole substantial question of law in Tax Appeal No. 18 of 2013 is also required to be answered in favour of the Appellant - Assessee and against the Respondent-Revenue. To that extent therefore, the impugned judgments and orders made by the ITAT warrant interference and modification. 43. Thus, we answer all the three substantial questions of law framed in Tax Appeal No. 17 of 2013 in favour of the Appellant - Assessee and against the Respondent -Revenue. Similarly, we answer the sole substantial question of law framed in Tax Appe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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