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Cess: An allowable expenditure under the Income-tax Act?
By Shashank Sharma and Snehal Ranjan Shukla
The article in this issue of Direct Tax Amicus attempts to discuss the dispute as to whether income-tax includes in its ambit the surcharge and cess also. Taking help from the Constitution, Income-tax Act, 1961 and various judicial pronouncements, the authors seek to answer the question, whether a deduction of the cess can be claimed under the Act. The article elaborates upon the charge of income-tax, what is ‘cess’, legislative history and scope of Section 40(a)(ii) and whether cess is a tax levied on profits. The authors also analyse the Rajasthan and Bombay High Courts decisions allowing deduction of education cess. Further, noting that both the High Courts have relied upon the CBDT Circular which can also be read to mean that it is not every kind of cess that is excluded from the purview of Section 40(a)(ii) of the Act, the authors state that the issue is open for litigation unless either the Supreme Court or the legislature brings in the much needed clarification on the matter...
Notifications
Cash payments to hospitals for treatment of Covid-19 relaxed
Time limits for certain compliances extended to provide relief in view of Covid pandemic
Slump sale – New Rule introduced for computation of fair market value of capital assets
Appeals to CIT(A) – Limitation period clarified
Withdrawal of application pending before Settlement Commission – Procedure prescribed
Ratio decidendi
Assessment order under National Faceless Assessment Scheme, without a hearing, when not correct – Delhi High Court
Carry forward of short-term capital loss, exempt under India-Singapore DTAA, allowed as Section 74 more beneficial to assessee – ITAT Mumbai
Adjustment of refund against outstanding demand, over and above the amount necessary to grant stay, not correct – Bombay High Court
Expenses incurred between setting up and commencement of business deductible – Delhi High Court
Foreign exchange fluctuation gains arising on receipt of repayment of personal loan not taxable as capital receipt – ITAT Mumbai
Remand by ITAT to AO for further verification incorrect when CIT(A) had accepted the claim after verifying same – Delhi High Court
