Expense of Education Cess does not fall under Capital Expense, Personal Expenditure: ITAT allows Deduction [Read Order]

The Delhi Bench of Income Tax Appellate Tribunal (ITAT) while allowing the deduction ruled that expense of Education Cess does not fall under capital expense, personal expenditure.

The Assessee, M/s Expeditors International (India) Pvt. Ltd. is engaged in the provision of logistics services in the Indian region. The logistics services provided range from packing, loading/ unloading, trucking, containerization, customs clearance, and other cargo handling activities besides moving the goods via air/ sea. Expeditors India’s functions comprise the Indian leg of a logistics contract involving the transportation of consignments from the consignee (or Indian port/ airport) to the Indian Port/ airport (or consignee) while another Group entity typically handles similar services at the other end of the consignment in their respective region.

The assessee argued that education cess paid on Income Tax doesn’t come under the purview of the definition as it is levied on the amount of Income Tax but not on profits of the business. The ld. AR relied on the Circular No. 91/58/66-ITJ(19) by CBDT dated May 18, 1967, which states the effect of the omission of the words ‘cess’ from Section 40(a)(ii) is that only taxes paid are to be disallowed in the assessment for the assessment years 1962- 63 onwards.

The coram of Judicial Member, Amit Shukla, and Accountant Member, Dr. B. R. R. Kumar held that Education Cess is not of the nature described in sections 30 to 36, Education Cess is not in the nature of capital expenditure, Education Cess is not the personal expense of the Assessee, it is mandatory for it to pay Education Cess and for the purpose of computation of Education Cess, the Income ‘Tax’ is taken as the criteria for computational purpose. Thus, the expense of Education Cess is mandatory expenses to be paid but does not fall under capital expense and personal expenditure and hence may be allowed as deduction.

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