The Income Tax Appellate Tribunal (ITAT), Mumbai Bench restored the issue back to AO to determine eligibility for deduction of the amount paid as Cess.
The assessee, Sulzer Pumps India Limited has raised the issue in respect of the amount paid by the assessee in the nature of Education Cess, and Higher and Secondary Education Cess ought to be allowed as deduction in computing its business income for the year under consideration.
The department submitted that there is a clear limitation inside section 143(2) after amendment and that limitation is cast in the powers available in the section, not unlimited power as prevailing prior to 01.04.1989; none of the existing case decisions of ITAT, High Court, Supreme Court had occasion to discuss the limitation inside section 143(2) post amendment and the possibility of consequent limitation in the admission of additional grounds at the appellate stage on totaling unconnected issues with the assessment proceedings.
If limitation in power under section 143(1)/154 etc. applies, the same limitation in power in section 143(2) has to be factored in before a decision of any additional ground is taken. Thus, it is stated by him that under each of the sections is 143(1) or 143(2) or 154 or any other section has limited scope and action outside the limit is not intended in any of these sections.
The coram of Vikas Awasthy and N.K.Pradhan restores the issue back to the AO for passing an order and held that a deduction should be allowed, where a tax is imposed by a district board on business with reference to ‘estimated income’ or by a municipality with reference to ‘gross income’.
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