1 TXA17&18-13 dt. 28.02.2020 IN HIGH COURT OF BOMBAY AT GOA TAX APPEAL NO.17 OF 2013 Sesa Goa Limited, Sesa Ghor, 20 EDC Complex, Patto, Panjim, Goa 403001 Appellant Versus Joint Commissioner of Income-Tax, Range 1, Panaji Goa. Respondent Mr. R. G. Ramani, Senior Advocate with Ms. Srushti Patil, Advocate for Appellant. Ms. Susan Linhares, Standing Counsel for Respondent. AND TAX APPEAL NO. 18 OF 2013 Sesa Goa Limited, Sesa Ghor, 20 EDC Complex, Patto, Panjim, Goa 403001 Appellant Versus Joint Commissioner of Income-Tax, Range 1, Panaji Goa. Respondent Mr. R. G. Ramani, Senior Advocate with Ms. Srushti Patil, Advocate for Appellant. Ms. Susan Linhares, Standing Counsel for Respondent. 2 TXA17&18-13 dt. 28.02.2020 Coram:- M. S. SONAK & NUTAN D. SARDESSAI, JJ. Reserved on :- 27th February, 2020 Pronounced on: 28th February, 2020 Judgment (Per M. S. Sonak,J) Heard Mr. R. G. Ramani, learned Senior Advocate who appears alongwith Ms. Srushti Patil for Appellant in both these appeals. 2. Heard Ms. Susan Linhares, learned Standing Counsel for Income Tax Department Respondent, in both these appeals. 3. learned counsel for parties state that both these appeals can be taken up and disposed of by common judgment and order. 4. Tax Appeal No.17 of 2013 was admitted by order dated 23 rd September, 2013 on following substantial questions of law :- i. Whether on fact and in circumstances of case, issue as to Appellant's claim against disallowance u/s. 40(a)(i) of Act of amount paid as demurrage to non-resident buyers of iron ore, which demurrage has been accepted by Tribunal as taxable u/s. 172 of Act, could be considered as covered by decision of Hon'ble High Court in case of Orient 3 TXA17&18-13 dt. 28.02.2020 Goa P. Ltd. (Supra) considering that in said decision, Hon'ble High Court had observed that there were no pleadings or material brought on records to show that case is governed by occasional shipping within meaning of section 172 of Act, and that said section applies. ii. Whether on fact and in circumstances of case, issue about Appellants claim that demurrage paid to non-resident buyers of iron ore in terms of relevant sales contract was not income accrued or arisen to said non-resident buyers in India within meaning of section 5(2)(b) read with Explanation 1(b) to section 9(1)(i) of Act, could be considered as covered by decision of Hon'ble High Court in case of Orient Goa P. Ltd. (supra). iii. Whether on facts and in circumstances of case and in law, Education Cess and Higher and Secondary Education Cess is allowable as deduction in year of payment. 5. Similarly, Tax Appeal No.18 of 2013 was admitted vide order dated 23rd September, 2013 on following substantial question of law :- i. Whether on facts and in circumstances of case and in law, Education Cess and Higher and Secondary Education Cess is allowable as deduction in year of payment? 6. Both appeals have been instituted by same Appellant Assessee though, in respect of assessment for different Assessment 4 TXA17&18-13 dt. 28.02.2020 Years. substantial question of law No.(iii) in Tax Appeal No.17 of 2013 is also only substantial question of law involved in Tax Appeal No.18 of 2013. For all these reasons, it is only appropriate for both these appeals are disposed of by common judgment and order. 7. In so far as substantial questions of law Nos. (i) and (ii) in Tax Appeal No.17 of 2013 are concerned, we note that same arise in context of assessment for Assessment Year 2008-2009. In fact, identical questions arose in relation to Appellant Assessee for Assessment Year 2009-2010, which is evident from order of Income Tax Appellate Tribunal (ITAT) in ITA No.72/PNJ/2012 and ITA No.85/PNJ/2012. These questions have been set out as question Nos.(3) and (4) in judgment and order dated 8th March, 2013 by which said two appeals came to be disposed of by ITAT. 8. ITAT, upon detailed consideration of such questions has in fact held in favour of Appellant Assessee and against Respondent Revenue, in so far as Assessment Year 2009-2010 is concerned. ITAT has referred to Circular number 723 dated 19th September, 1995 which deals with provision of Sections 172, 194C and 195 of IT Act and held that it is apparently clear that provisions of Sections 194C and 195 relating to tax deduction at source are not applicable. ITAT further held that since Circular issued 5 TXA17&18-13 dt.28.02.2020 by CBDT is binding on Department, Appellant Assessee was not obliged to deduct TDS on payment made as demurrage charges and demurrage charges are also liable to be taxed under Section 172 of IT Act. Since Assessee was not liable to deduct tax at source, no question arise for making any disallowance under Section 40(a)(i). 9. Normally, ITAT in respect of very same Assessee was expected to follow its own judgment and order dated 8th March, 2013 in concerning Assessment Year 2009-2010, when it came to assessment in Assessment Year 2008-2009. However, in its judgment and order dated 17th May, 2013 in ITA No.89/PNJ/2012, which is impugned judgment and order in Tax Appeal No.17 of 2013, ITAT felt itself obliged to follow decision of Division Bench of this Court in CIT Vs Orient (Goa) Co. Pvt. Ltd. reported in 3 Vol. 325 ITR 554 and on such basis answered ground Nos. 5 and 6 set out in ITA No.89/PNJ/2012, against Appellant Assessee and in favour of Respondent -Revenue. 10. Mr. R. G. Ramani, learned Senior Advocate appearing for Appellant has now placed reliance upon decision of Full Bench of this Court in Income Tax Appeal No.989 of 2015 and connected matters disposed of on 5th February, 2016. He submits that 6 TXA17&18-13 dt. 28.02.2020 Full Bench has held that Orient (Goa) Private Limited ( supra ) was not correctly decided and stands overruled by decision of Full Bench. He therefore submits that view taken by ITAT itself, in relation to Assessment Year 2009-2010, which was not even challenged by Respondent Revenue, in case of this very Appellant Assessee, is required to be restored, in so far as Assessment Year 2008- 2009 is concerned. 11. judgment and order dated 5 th February, 2016 made by Full Bench indicates that reference to Full Bench was necessitated on account of another Division Bench of this Court disagreeing with view taken in Orient (Goa) Private Limited ( supra ). Deferring to demand of judicial discipline, Division Bench, placed papers before Hon'ble Chief Justice so as to obtain suitable direction for placing matter before Full Bench. Accordingly, Full Bench was constituted to consider following question of law :- Whether, while dealing with allowability of expenditure under Section 40(a)(i) of Income Tax Act, 1961, status of person making expenditure has to be non-resident before provision to Section 172 of Act can be invoked ? 12. Full Bench, upon detailed consideration of matter has answered aforesaid question of law in favour of Assessee and 7 TXA17&18-13 dt. 28.02.2020 against Revenue. In effect Full Bench, has not agreed with view taken by Division Bench in Orient (Goa) Private Limited ( supra ). 13. As noted earlier, since, ITAT in its impugned judgment and order dated 17th May, 2013, has solely relied upon Orient (Goa) Private Limited ( supra ) in order not to follow its own view, in respect of this very Appellant Assessee, in respect of Assessment Year 2009-2010, we feel that substantial questions of law Nos.(i) and (ii) now framed in Tax Appeal No.17 of 2013, are required to be answered in favour of Appellant Assessee and against Respondent Revenue, now that Full Bench of this Court has disagreed in view of Division Bench in Orient (Goa) Private Limited (supra) and decided substantial question of law in favour of Assessee and against Revenue. We do so accordingly. 14. Therefore, substantial questions of law Nos.(i) and (ii) framed in Tax Appeal No.17 of 2013 are hereby answered in favour of Appellant Assessee and against Respondent-Revenue. To that extent, view taken by ITAT in its impugned judgment and order dated 17th May, 2013 is ordered to be modified. 15. substantial question of law No.(iii) in Tax Appeal No.17 8 TXA17&18-13 dt. 28.02.2020 of 2013 and only substantial question of law in Tax Appeal No.18 of 2013 is one and same namely, 'whether Education Cess and Higher and Secondary Education Cess, collectively referred to as cess is allowable as deduction in year of its payment ?'. 16. aforesaid question arises in context of provisions of Section 40(a)(ii) which inter alia provides that notwithstanding anything to contrary in sections 30 to 38 of IT Act, following amounts shall not be deducted in computing income chargeable under head Profits and gains of business or profession, - (a) in case of any assessee - (ia) (ib) (ic) (ii) any sum paid on account of any rate or tax levied on profits or gains of any business or profession or assessed at proportion of, or otherwise on basis of, any such profits or gains. [Explanation 1. For removal of doubts, it is hereby declared that for purposes of this sub-clause, any sum paid on account of any rate or tax levied includes and shall be deemed always to have included any sum eligible for relief of tax under section 90 or, as case may be, deduction from Indian income-tax payable under section 91.] [Explanation 2. For removal of doubts, it is hereby declared that for purposes of this sub-clause, any 9 TXA17&18-13 dt. 28.02.2020 sum paid on account of any rate or tax levied includes any sum eligible for relief of tax under section 90A 17. Therefore, question which arises for determination is whether expression any rate or tax levied as it appears in Section 40(a)(ii) of IT Act includes cess. Appellant Assessee contends that expression does not include cess and therefore, amounts paid towards cess are liable to be deducted in computing income chargeable under head profits and gains of business or profession . However, Respondent Revenue contends that cess is also included in scope and import of expression any rate or tax levied and consequently, amounts paid towards cess are not liable for deduction in computing income chargeable under head profits and gains of business or profession. 18. In relation to taxing statute, certain principles of interpretation are quite well settled. In New Shorrock Spinning and Manufacturing Co. Ltd. Vs Raval, 37 ITR 41 (Bom.), it is held that one safe and infallible principle, which is of guidance in these matters, is to read words through and see if rule is clearly stated. If language employed gives rule in words of sufficient clarity and precision, nothing more requires to be done. Indeed, in such case task of interpretation can hardly be said to arise : Absoluta sententia 10 TXA17&18-13 dt.28.02.2020 expositore non indiget. language used by Legislature best declares its intention and must be accepted as decisive of it. 19. Besides, when it comes to interpretation of IT Act, it is well established that no tax can be imposed on subject without words in Act clearly showing intention to lay burden on him. subject cannot be taxed unless he comes within letter of law and argument that he falls within spirit of law cannot be availed of by department. [See CIT vs Motors & General Stores 66 ITR 692 (SC)]. 20. In taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about tax. There is no presumption as to tax. Nothing is to be read in, nothing is to be implied, into provisions which has not been provided by legislature [See CIT Vs Radhe Developers 341 ITR 403 ]. One can only look fairly at language used. No tax can be imposed by inference or analogy. It is also not permissible to construe taxing statute by making assumptions and presumptions [See Goodyear Vs State of Haryana 188 ITR 402(SC)]. 21. There are several decisions which lay down rule that provision for deduction, exemption or relief should be interpreted 11 TXA17&18-13 dt. 28.02.2020 liberally, reasonably and in favour of assessee and it should be so construed as to effectuate object of legislature and not to defeat it. Further, interpretation cannot go to extent of reading something that is not stated in provision [See AGS Tiber Vs CIT 233 ITR 207]. 22. Applying aforesaid principles, we find that legislature, in Section 40(a)(ii) has provided that any rate or tax levied on profits and gains of business or profession shall not be deducted in computing income chargeable under head profits and gains of business or profession. There is no reference to any cess. Obviously therefore, there is no scope to accept Ms. Linhares's contention that cess being in nature of Tax is equally not deductable in computing income chargeable under head profits and gains of business or profession. Acceptance of such contention will amount to reading something in text of provision which is not to be found in text of provision in Section 40(a)(ii) of IT Act. 23. If legislature intended to prohibit deduction of amounts paid by Assessee towards say, education cess or any other cess, then, legislature could have easily included reference to cess in clause (ii) of Section 40(a) of IT Act. fact that legislature has not done so means that legislature did not intend to prevent 12 TXA17&18-13 dt.28.02.2020 deduction of amounts paid by Assessee towards cess, when it comes to computing income chargeable under head profits and gains of business or profession. 24. legislative history bears out that Income Tax Bill, 1961, as introduced in Parliament, had Section 40(a)(ii) which read as follows : (ii) any sum paid on account of any cess, rate or tax levied on profits or gains of any business or profession or assessed at proportion of, or otherwise on basis of, any such profits or gains 25. However, when matter came up before Select Committee of Parliament, it was decided to omit word cess from aforesaid clause from Income Tax Bill, 1961. effect of omission of word cess is that only any rate or tax levied on profits or gains of any business or profession are to be deducted in computing income chargeable under head profits and gains of business or profession . Since deletion of expression cess from Income Tax Bill, 1961, was deliberate, there is no question of reintroducing this expression in Section 40(a)(ii) of IT Act and that too, under guise of interpretation of taxing statute. 26. In fact, in aforesaid precise regard, reference can usefully 13 TXA17&18-13 dt.28.02.2020 be made to Circular No. F. No.91/58/66-ITJ(19), dated 18 th May, 1967 issued by CBDT which reads as follows :- Interpretation of provision of Section 40(a)(ii) of IT Act, 1961 Clarification regarding.- Recently case has come to notice of Board where Income Tax Officer has disallowed cess' paid by assessee on ground that there has been no material change in provisions of section 10(4) of Old Act and Section 40(a)(ii) of new Act. 2. view of Income Tax Officer is not correct. Clause 40(a)(ii) of Income Tax Bill, 1961 as introduced in Parliament stood as under:- "(ii) any sum paid on account of any cess, rate or tax levied on profits or gains of any business or profession or assessed at proportion of, or otherwise on basis of, any such profits or gains". When matter came up before Select Committee, it was decided to omit word cess' from clause. effect of omission of word cess' is that only taxes paid are to be disallowed in assessments for years 1962-63 and onwards. 3. Board desire that changed position may please be brought to notice of all Income Tax Officers so that further litigation on this account may be avoided.[Board's F. No.91/58/66-ITJ(19), dated 18-5-1967.] 27. CBDT Circular, is binding upon authorities under IT Act like Assessing Officer and Appellate Authority. CBDT Circular is quite consistent with principles of interpretation 14 TXA17&18-13 dt.28.02.2020 of taxing statute. This, according to us, is additional reason as to why expression cess ought not to be read or included in expression any rate or tax levied as appearing in Section 40(a)(ii) of IT Act. 28. In Income Tax Act, 1922, Section 10(4) had banned allowance of any sum paid on account of any cess, rate or tax levied on profits or gains of any business or profession. In corresponding Section 40(a)(ii) of IT Act, 1961 expression cess is quite conspicuous by its absence. In fact, legislative history bears out that this expression was in fact to be found in Income Tax Bill, 1961 which was introduced in Parliament. However, Select Committee recommended omission of expression cess and consequently, this expression finds no place in final text of provision in Section 40(a)(ii) of IT Act, 1961. effect of such omission is that provision in Section 40(a)(ii) does not include, cess and consequently, cess whenever paid in relation to business, is allowable as deductable expenditure. 29. In Kanga and Palkhivala's Law and Practice of Income Tax (Tenth Edition), several decisions have been analyzed in context of provisions of Section 40(a)(ii) of IT Act, 1961. There is reference to decision of Privy Council in CIT Vs Gurupada Dutta 14 ITR 100, where union rate was imposed under Village Self Government 15 TXA17&18-13 dt.28.02.2020 Act upon assessee as owner or occupier of business premises, and quantum of rate was fixed after consideration of 'circumstances' of assessee, including his business income. Privy Council held that rate was not 'assessed on basis of profits' and was allowable as business expense. Following this decision, Supreme Court held in Jaipuria Samla Amalgamated Collieries Ltd Vs CIT [82 ITR 580] that expression 'profits or gains of any business or profession' has reference only to profits and gains as determined in accordance with Section 29 of this Act and that any rate or tax levied upon profits calculated in manner other than that provided by that section could not be disallowed under this sub-clause. Similarly, this sub- clause is inapplicable, and deduction should be allowed, where tax is imposed by district board on business with reference to 'estimated income' or by municipality with reference to ' gross income'. Besides, unlike Section 10(4) of 1922 Act, this sub-clause does not refer to 'cess' and therefore, 'cess' even if levied upon or calculated on basis of business profits may be allowed in computing such profits under this Act. 30. Division Bench of Rajasthan High Court (Jaipur Bench) in Income Tax Appeal No.52/2018 decided on 31 st July, 2018 (Chambal Fertilisers and Chemicals Ltd. Vs CIT Range-2, Kota), by reference to aforesaid CBDT Circular dated 18th May, 1967 has held 16 TXA17&18-13 dt. 28.02.2020 that ITAT erred in holding that education cess is disallowable expenditure under Section 40(a)(ii) of IT Act. Ms. Linhares was unable to state whether Revenue has appealed this decision. Mr. Ramani, learned Senior Advocate submitted that his research did not suggest that any appeal was instituted by Revenue against this decision, which is directly on point and favours Assessee. 31. Mr. Ramani, in fact pointed out three decisions of ITAT, in which, decision of Rajasthan High Court in Chambal Fertilisers and Chemicals Ltd.(supra) was followed and it was held that amounts paid by Assessee towards ' education cess' were liable for deduction in computing income chargeable under head of profits and gains of business or profession . They are as follows :- (i) DCIT Vs Peerless General Finance and Investment and Co. Ltd. (ITA No.1469 and 1470/Kol/2019 decided on 5 th December, 2019 by ITAT, Calcutta; (ii) DCIT Vs Graphite India Ltd. (ITA No.472 and 474 Co. No.64 and 66/Kol/2018 decided on 22nd November, 2019) by ITAT, Calcutta; (iii) DCIT Vs Bajaj Allianz General Insurance (ITA No.1111 and 1112/PUN/2017 decided on 25th July, 2019) by ITAT, Pune. 32. Again, Ms. Linhares, learned Standing Counsel for 17 TXA17&18-13 dt.28.02.2020 Revenue was unable to say whether Revenue had instituted appeals in aforesaid matters. Mr. Ramani, learned Senior Advocate for Appellant submitted that to best of his research, no appeals were instituted by Revenue against aforesaid decisions of ITAT. 33. ITAT, in impugned judgment and order, has reasoned that since cess is collected as part of income tax and fringe benefit tax, therefore, such cess is to be construed as tax . According to us, there is no scope for such implications, when construing taxing statute. Even, though, cess may be collected as part of income tax, that does not render such cess, either rate or tax, which cannot be deducted in terms of provisions in Section 40(a)(ii) of IT Act. mode of collection, is really not determinative in such matters. 34. Ms. Linhares, has relied upon M/s Unicorn Industries Vs Union of India and others, 2019 SCC Online SC 1567 in support of her contention that cess is nothing but tax and therefore, there is no question of deduction of amounts paid towards cess when it comes to computation of income chargeable under head profits or gains of any business or profession. 18 TXA17&18-13 dt. 28.02.2020 35. issue involved in Unicorn Industries (supra) was not in context of provisions in Section 40(a)(ii) of IT Act. Rather, issue involved was whether education cess, higher education cess and National Calamity Contingent Duty (NCCD) on it could be construed as duty of excise which was exempted in terms of Notification dated 9th September, 2003 in respect of goods specified in Notification and cleared from unit located in Industrial Growth Centre or other specified areas with State of Sikkim. High Court had held that levy of education cess, higher education cess and NCCD could not be included in expression duty of excise and consequently, amounts paid towards such cess or NCCD did not qualify for exemption under exemption Notification. This view of High Court was upheld by Apex Court in Unicorn Industries (supra). 36. aforesaid means that Supreme Court refused to regard levy of education cess, higher education cess and NCCD as duty of excise when it came to construing exemption Notification. Based upon this, Mr. Ramani contends that similarly amounts paid by Appellant Assessee towards cess can never be regarded as amounts paid towards tax so as to attract provisions of Section 40(a)(ii) of IT Act. All that we may observe is that issue involved in Unicorn Industries (supra) was not at all issue involved in present matters and therefore, decision in Unicorn Industries 19 TXA17&18-13 dt. 28.02.2020 (supra) can be of no assistance to Respondent Revenue in present matters. 37. Ms. Linhares, learned Standing Counsel for Revenue however submitted that Appellant Assessee, in its original return, had never claimed deduction towards amounts paid by it as cess. She submits that neither was any such claim made by filing any revised return before Assessing Officer. She therefore relied upon decision of Supreme Court in Goetze (India) Ltd. Vs Commissioner of Income Tax (2006) 284 ITR 323 (SC) to submit that Assessing Officer, was not only quite right in denying such deduction, but further Assessing Officer had no power or jurisdiction to grant such deduction to Appellant Assessee. She submits that this is what precisely held by ITAT in its impugned judgments and orders and therefore, same, warrants no interference. 38. Although, it is true that Appellant Assessee did not claim any deduction in respect of amounts paid by it towards cess in their original return of income nor did Appellant Assessee file any revised return of income, according to us, this was no bar to Commissioner (Appeals) or ITAT to consider and allow such deductions to Appellant Assessee in facts and circumstances of present case. record bears out that such deduction was clearly 20 TXA17&18-13 dt. 28.02.2020 claimed by Appellant Assessee, both before Commissioner (Appeals) as well as ITAT. 39. In CIT Vs Pruthvi Brokers & Shareholders Pvt. Ltd. 349 ITR 336, one of questions of law which came to be framed was whether on facts and circumstances of case, ITAT, in law, was right in holding that claim of deduction not made in original returns and not supported by revised return, was admissible. Revenue had relied upon Goetze (supra ) and urged that ITAT had no power to allow claim for deduction. However, Division Bench, whilst proceeding on assumption that Assessing Officer in terms of law laid down in Goetze (supra) had no power, proceeded to hold that Appellate Authority under IT Act had sufficient powers to permit such deduction. In taking this view, Division Bench relied upon Full Bench decision of this Court in Ahmedabad Electricity Co. Ltd Vs CIT 199 ITR 351 to hold that Appellate Authorities under IT Act have very wide powers while considering appeal which may be filed by Assessee. Appellate Authorities may confirm, reduce, enhance or annul assessment or remand case to Assessing Officer. This is because, unlike ordinary appeal, basic purpose of tax appeal is to ascertain correct tax liability of Assessee in accordance with law. 21 TXA17&18-13 dt.28.02.2020 40. decision in Goetze (supra) upon which reliance is placed by ITAT also makes it clear that issue involved in said case was limited to power of assessing authority and does not impinge on powers of ITAT under section 254 of said Act. This means that in Goetze (supra), Hon'ble Apex Court was not dealing with extent of powers of appellate authorities but observations were in relation to powers of assessing authority. This is distinction drawn by division Bench in Pruthvi Brokers (supra) as well and this is distinction which ITAT failed to note in impugned order. 41. Besides, we note that in present case, though claim for deduction was not raised in original return or by filing revised return, Appellant Assessee had indeed addressed letter claiming such deduction before assessment could be completed. However, even if we proceed on basis that there was no obligation on Assessing Officer to consider claim for deduction in such letter, Commissioner (Appeals) or ITAT, before whom such deduction was specifically claimed was duty bound to consider such claim. Accordingly, we are unable to agree with Ms. Linhare's contention based upon decision in Goetze (supra). 42. For all aforesaid reasons, we hold that substantial 22 TXA17&18-13 dt.28.02.2020 question of law No.(iii) in Tax Appeal No.17 of 2013 and sole substantial question of law in Tax Appeal No.18 of 2013 is also required to be answered in favour of Appellant Assessee and against Respondent-Revenue. To that extent therefore, impugned judgments and orders made by ITAT warrant interference and modification. 43. Thus, we answer all three substantial questions of law framed in Tax Appeal No.17 of 2013 in favour of Appellant Assessee and against Respondent -Revenue. Similarly, we answer sole substantial question of law framed in Tax Appeal No.18 of 2013, in favour of Appellant Assessee and against Respondent Revenue. 44. impugned judgments and orders made by ITAT are accordingly directed to be modified and necessary benefits extended to Appellant Assessee. 45. appeals are disposed of in aforesaid terms. There shall be no order as to costs. NUTAN D. SARDESSAI, J. M. S. SONAK, J. at Sesa Goa Limited v. Joint Commissioner of Income-tax, Range-1, Panaji