The Kolkata bench of Income Tax Appellate Tribunal (ITAT) quashed the order passed by the commissioner of income tax( appeals) for deleting the disallowance of education cess claim made by the assessing officer under Section 115JB of Income Tax Act, 1961 without proper verification.
Srei Infrastructure Finance Limited,the appellant assessee was a Non-Banking Financial Company (NBFC) and mandatorily required to transfer at least 20% of their net profits to a Reserve Fund as per
Section 45-IC of the Reserve Bank of India Act, 1934.
The assessee appealed against the order passed by assessing officer for disallowing the claim of educational cess under Section 115JB of Income Tax Act, 1961. The Commissioner pf Income Tax (Appeals) deleted the rejection of educational cess claim made by the assessing officer. Thus the revenue challenged the order passed by the commissioner.
S.K. Tulsiyan,the counsel for the assessee contended that the rejection of educational cess claim was against the provision of law. It was also submitted that the contingent provision against the standard asset is made as per the RBI guidelines and not on adhoc basis and cannot be treated as an unascertained liability.
Subhrajyoti Bhattacharjee, the counsel for the revenue contended that RBI had directed for creation of contingent provision on standard assets in accordance with the prudential norms of RBI, however, that itself cannot be said to be ascertained liability of the assessee.
The two member bench comprising of Sanjay Garg (Judicial Member) and Girish Agrawal (Accountant Member) held that they does not find any justification on the part of commissioner in deleting the impugned disallowance made by the assessing officer while computing the book profit under Section 115JB of the Income Tax Act, 1961 and are liable to be quashed.
It was also held that the disallowance of educational cess claim made by the assessing officer is valid under Section 115JB of Income Tax Act, 1961 while dismissing the appeal filed by the assessee.
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