INCOME TAX ACT, 1961

Section 37(1)

Business expenditure - Deduction of education cess - Education cess is not a tax and is an expenditure - Allowability

Assessee was engaged in business of coal trading and operated in most of the States of India. It procured coal from various sources, i.e., from Indian collieries, purchase from local market and also import coal from different countries. During the course of assessment proceedings, assessee filed written submissions providing information called for by AO. Assessee made a fresh claim of deduction of Education Cess before AO which was not accepted by AO. Assessment under section 143(3) was completed making additions/disallowances. Held: High Court in the case of Chambal Fertilisers & Chemicals Ltd. v. Jt.CIT [ITA. No.52/2018, dated 31-7-2018] found that the facts of the case were identical to the facts of the case in appeal and held that education cess is not a tax and thus is an expenditure under section 37 which cannot be claimed against the profits and gains of business carried out by the assessee. Similar issue stands adjudicated in assessee's own case for the assessment years 2012-13 to 2014-15 wherein issue was decided in favour of the assessee by allowing the claim of education cess to be allowed as an expenditure.