Deductibility Of Cesses And Surcharges

Budget Proposal

The Finance Bill 2022 has clarified that tax shall include and deemed to have always included any surcharge or cess, by whatever name called, on such tax. Accordingly, education cess & others would not be allowed as a deduction while computing "Profits and gains of business or profession". This amendment is proposed to come into effect from April 1, 2005, and accordingly would apply in relation to AY 2005-06 and thereafter.

Impact

The proposed retrospective amendment will impact the taxpayers that have been claiming deduction of education cess while computing "Profits and gains of business or profession" by relying on the decision of Rajasthan High Court in the case of Chambal Fertilisers (ITA 52 of 2018) and Bombay High Court in the case of Sesa Goa (117 taxmann.com 96).