Payment of Education cess cannot be considered as an expenditure u/s 37 and 40(a)(ii) of Income Tax Act : ITAT [Read Order]

The New Delhi bench of Income Tax Appellate Tribunal (ITAT) held that the payment of educational cess should not be allowed as an expenditure under section 37 and 40(a)(ii) of Income Tax Act 1961.

 Shri Maral Overseas Ltd, the appellant assessee appealed against the separate orders passed by the Commssioner of Income Tax (Appeals) for the assessment years of 2014- 2018.

Mr. Satyajeet Goel, the counsel for the appellant asseessee contended that the Commissioner of Income Tax(Appeals) was not justified in rejecting the claim of education cess even though it was eligible deduction under the Income Tax Act, 1961.

It was also submitted that there was no prohibition or restriction in the Income Tax Act regarding claim of education, that education cess paid during the year was an eligible deduction, that the decision of the commissioner was contrary to settled legal position and scheme of the Income Tax Act.

Ms. Sarita Kumari, the counsel for the respondent contended that the appeals are no longer res integra due to the decision of  Supreme Court of India in the case of Joint Commissioner of Income Tax Vs. Chambal Fertilizers and Chemicals Ltd.

It was also submitted that the only issues involved in the appeal are regarding the payment of education cess and which was not allowed as an expenditure under section 37 and 40 (a)(ii) of the Income Tax Act 1961 as per the decision of the above case.

 The two member bench comprising of Shri Yogesh Kumar U.S (Judicial) and Shri Anil Chaturvedi ( Accountant) held that the education cess paid by the Assessee would not be allowed as an expenditure under Section 37 read with Section 40(a) (ii) of the Income Tax Act 1961 while dismissing the appeal.

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