Surcharge and Education Cess are not Tax, hence, cannot be included for Computing Tax Effect: ITAT [Read Order]

Educational Cess - Education Cess Tax - Taxscan

The Income Tax Appellate Tribunal recently proclaimed that Surcharge and Education Cess are not tax and therefore, it should not include for computing tax.

The tribunal noted that the tax effect of Rs. 90,000/- and education cess of Rs. 29,700/- do not form part of income tax. In present appeal it was found that tax thereon was Rs. 9 Lakhs only, which is less than Rs. 10 Lakhs limit prescribed, the Bench was of the opinion that there was no merit in the Miscellaneous Application filed by the Revenue.

The revenue approached the Tribunal by relying on the Supreme Court judgment in the case of CIT vs. Srinivasan [83 ITR 346 (S)] to contend that surcharge and education cess should also be included while calculating the tax effect.

The bench including vice president Shri D. Manmohan and accountant member B. Ramakotaiah while hearing both the contention are of the opinion that the second miscellaneous application preferred by the Revenue is not maintainable.

Finally the bench pointed out that surcharge is part of tax effect then the amount of surcharge is only Rs. 90,000/- still the tax effect is less than Rs. 10 Lakhs. As far as inclusion of education cess is concerned, the same cannot be considered as part of tax, in view of the High Court decision in the case of Srikakollu Subba Rao & Co., Vs. Union of India & Ors. Wherein held that market cess was not a tax and that the provisions of Section 43B had no application to market cess.

This aforesaid principle will also apply to the education cess levied and finally bench advised the Revenue to be careful in future, otherwise there will be costs attracted for these unnecessary and infructuous petitions.

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