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TMI BlogClarification regarding treatment of cess and surchargeX X X X Extracts X X X X X X X X Extracts X X X X ..... r profession . 2. However, certain taxpayers are claiming deduction on account of cess or surcharge under section 40 of the Act claiming that cess has not been specifically mentioned in the aforesaid provisions of section 40(a)(ii) and, therefore, cess is an allowable expenditure. This view has been upheld by Courts in a few judgments. Further, Courts are also relying upon the CBDT Circular No. 91/58/66-ITJ(19) dated 18-05-1967. 3. The assessees rely upon the decision of the Hon ble Bombay High Court in the case of Sesa Goa Limited Vs. JCIT (2020) 117 taxmann.com and further on the decision of the Hon ble Rajasthan High Court in the case of Chambal Fertilizers Chemicals Ltd Vs. JCIT : D.B Income-tax Appeal No. 52/2018 de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under:- In our judgment it is unnecessary to express any opinion in the matter because the essential point for determination is whether surcharge is an additional mode or rate for charging income tax. The meaning of the word surcharge as given in the Webster's New International Dictionary includes among others to charge (one) too much or in addition also additional tax . Thus the meaning of surcharge is to charge in addition or to subject to an additional or extra charge. If that meaning is applied to s. 2 of the Finance Act 1963 it would lead to the result that income tax and super tax were to be charged in four different ways or at four different rates which may be described as (i) the basic charge or rate (In part I of the Firs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... education. 23. A perusal of the aforesaid provisions of the Finance Act 2004 and Finance Act 2011 would show that it has been specifically provided that education cess is an additional surcharge levied on the income-tax. Therefore, in the light of the decision of the Hon ble Supreme Court in the case of CIT Vs. K. Srinivasan (supra) the additional surcharge is part of the income-tax. The aforesaid decision of the Hon ble Apex Court and the provisions of Finance Act, 2004 and the relevant provisions of section 2(11) (12) of the subsequent Finance Acts have not been brought into the knowledge of the Hon ble High Courts in the cases of Sesa Goa Ltd Chambal Fertilisers (supra). Since the decision of the Hon ble Supreme Court prev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further litigation on this account may be avoided. 6. In the above referred Circular issued by CBDT, Cess is to be allowed under sub-clause (ii) of clause (a) of section 40 of the Act. However, it is to be noted that Cess is imposed not only by the Central Government through Finance Act for a financial year, but also by various State Governments. It is pertinent to mention that in the above referred Circular of CBDT, there is no reference to the Cess imposed by the Central Government through Finance Act for a particular year. This CBDT circular needs to be seen from the perspective that Education Cess imposed by Finance Act 2004 and subsequent Acts and then designated as Education and Health Cess are actually tax in the form o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raseology employed in the Finance Acts of 1940 and 1941 showed that only the rates of income tax and supertax were to be increased by a surcharge for the purpose of the Central Government. In the Finance Act of 1958 the language used showed that income tax which was to be charged was to be increased by a surcharge for the purpose of the Union. The word surcharge has thus been used to either increase the rates of income tax and super tax or to increase these taxes. The scheme of the Finance Act of 1971 appears to leave no room for doubt that the term Income tax as used in Section 2 includes surcharge. 8. Since the judgments of Rajasthan High Court and Bombay High Court did not consider the judgment of Hon ble Supreme Court discussed a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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