Ans: Hon’ble Rajasthan High Court in case of Chambal Fertilisers and
Chemicals Limited vs. JCIT (ITA No. 52/2018 order dated 31-07-2018) held
that Education Cess is not a tax ; therefore, the same is not required to be
disallowed under section 40(a)(ii) of the Act.
While passing the aforementioned judgement Hon’ble court has
specifically mentioned about CBDT Circular No 91/58/66-ITJ(19) dated
18/05/1967 where in CBDT has clarified that the effect of the omission of
the word “cess” from section 40(a)(ii) is that only taxes paid are to be
disallowed in the assessment for the years 1962- 63 onwards.
Further Hon’ble Bombay High Court in case of Sesa Goa Limited v JCIT
[2020] 117 taxmann.com 96 (Bombay) following the judgement of Hon’ble
Rajasthan High Court in case of Chambal Fertilisers and Chemicals
Limited(Supra) has held that Education Cess and Higher and Secondary
Education Cess are liable for deduction in computing income chargeable
under head of ‘profits and gains of business or profession’.
Kolkata bench of ITAT in case of ITC Limited v ACIT , ITA No.685/Kol/2014
following Hon’ble Rajasthan High Court has allowed deduction of cess paid
u/s 37 of Income Tax Act .
Similar view has been expressed in DCIT v. Peerless General Finance and
Investment and Co. Ltd. (ITA No. 1469 and 1470/Kol/2019.
Education Cess and Higher and Secondary Education Cess on Income Tax
paid on Profit of business or profession, not to be disallowed u/s 40(a)(ii)
of Income Tax Act, 1961.
