DCIT-7(1)(1), Mumbai V. M/S MOTILAL OSWAL SECURITIES LTD (NOW MERGED WITH MOTILAL OSWAL FINANCIAL SERVICES LTD), Mumbai

MA 124/MUM/2022

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 3610 (ITAT-MUMBAI)
• Duration Of Justice: 1 month(s) 14 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 07-07-2022
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2016-2017
• Appeal Filed On: 23-05-2022
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Retrospective amendment

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “D” MUMBAI BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND SHRI SANDEEP SINGH KARHAIL (JUDICIAL MEMBER) CO No. 73/MUM/2021 (ITA No. 4711/MUM/2019) Assessment Year: 2016-17 M/s Motilal Oswal Securities Ltd. (Now merged with M/s Motilal Oswal Financial Services Ltd.) Motilal Oswal Tower, Rahimtullah Sayani Road, Opp Parel ST Depot, Prabhadevi, Mumbai-400064. Vs. The Deputy Commissioner of Income Tax-7(1)(1), Mumbai. PAN No. AAECM 2876 P Appellant Respondent MA No. 124/MUM/2022 (CO No. 73/MUM/2021) Assessment Year: 2016-17 The Deputy Commissioner of Income Tax-7(1)(1), Mumbai. Vs. M/s Motilal Oswal Securities Ltd. (Now merged with M/s Motilal Oswal Financial Services Ltd.) Motilal Oswal Tower, Rahimtullah Sayani Road, Opp Parel ST Depot, Prabhadevi, Mumbai-400064. PAN No. AAECM 2876 P Appellant Respondent Revenue by : Ms. Vranda U. Matkari, DR Assessee by : Mr. Sunil Karnani, AR Date of Hearing : 08/07/2022 Date of pronouncement : 08/07/2022 PER OM PRAKASH KANT, AM The Revenue b seeking to rectify the order of the Tribunal in ITA No. 4711/M/2019 along with CO No. 73/M/2021 for assessment year 2016 respectively. 2. The Ld. DR submitted that while adjudicating the cross objection of the assesse Education cess, higher and secondary cess paid of following the decision of the Hon’ble Bombay High Court in the case of M/s Sesa Goa Ltd. v. JCIT Panaji (423 ITR 426) (Bombay) Ld. Ld. DR Submitted Act, 2022 wherein explanation has been introduced retrospectively w.e.f. April 1 st , 2005 clarifying that term tax shall include and shall be deemed to have always included any surcharge M/s Motilal Oswal Financial Services MA No. 124/M/2022 ORDER PER OM PRAKASH KANT, AM The Revenue by way of this Miscellaneous Application is seeking to rectify the order of the Tribunal in ITA No. 4711/M/2019 along with CO No. 73/M/2021 for assessment year 2016 The Ld. DR submitted that while adjudicating the cross objection of the assessee, the Tribunal has allowed higher and secondary cess paid of following the decision of the Hon’ble Bombay High Court in the case M/s Sesa Goa Ltd. v. JCIT Panaji (423 ITR 426) (Bombay) Submitted that in view of amendment made in Finance Act, 2022 wherein explanation has been introduced retrospectively , 2005 clarifying that term tax shall include and shall be deemed to have always included any surcharge M/s Motilal Oswal Financial Services Ltd. MA No. 124/M/2022 2 this Miscellaneous Application is seeking to rectify the order of the Tribunal in ITA No. 4711/M/2019 along with CO No. 73/M/2021 for assessment year 2016-17 The Ld. DR submitted that while adjudicating the cross- e, the Tribunal has allowed deduction of higher and secondary cess paid of ₹46,738/-, following the decision of the Hon’ble Bombay High Court in the case M/s Sesa Goa Ltd. v. JCIT Panaji (423 ITR 426) (Bombay). The that in view of amendment made in Finance Act, 2022 wherein explanation has been introduced retrospectively , 2005 clarifying that term tax shall include and shall be deemed to have always included any surcharge or cess, by whatever name called retrospective amendment, the qua education cess. 3. The Ld. Counsel did not object for rectification sought by the Department. 4. We have heard rival submissions of th the relevant material on record. The Tribunal vide para 19 of the order directed the Assessing Officer to allow education cess paid by the assessee as deduction. The relevant finding of the Tribunal is reproduced as under : “19. In so far the claim of the Ld. A.R that unlike “rates” and “taxes” the amount paid by an assessee towards “Education Cess” or any other “cess” viz. the Secondary and Higher Education Cess is not a disallowable expenditure u/s 40(a)(ii) of the Income issue is squarely covered by the recent order of the Hon’ble High Court of Bombay in the case of Sesa Goa Limited vs. Joint Commissioner of Income tax (2020) 107 CCH 375 (Bom). The Hon’ble High Court had observed that the legislature in Sec. 40(a)(ii) had though provided that “any rate or tax levied” on “profits and gains of business or profession” shall not be M/s Motilal Oswal Financial Services MA No. 124/M/2022 lled, on such tax and therefore, in view of the retrospective amendment, the assessee is not eligible for The Ld. Counsel did not object for rectification sought by the We have heard rival submissions of the parties and perused the relevant material on record. The Tribunal vide para 19 of the order directed the Assessing Officer to allow education cess paid by the assessee as deduction. The relevant finding of the Tribunal is as under : 19. In so far the claim of the Ld. A.R that unlike “rates” and “taxes” the amount paid by an assessee towards “Education Cess” or any other “cess” viz. the Secondary and Higher Education Cess is not a disallowable expenditure u/s 40(a)(ii) of the Income-tax Act, 1961, we find, that the said issue is squarely covered by the recent order of the Hon’ble High Court of Bombay in the case of Sesa Goa Limited vs. Joint Commissioner of Income tax (2020) 107 CCH 375 (Bom). The Hon’ble High Court had observed that e legislature in Sec. 40(a)(ii) had though provided that “any rate or tax levied” on “profits and gains of business or profession” shall not be M/s Motilal Oswal Financial Services Ltd. MA No. 124/M/2022 3 on such tax and therefore, in view of the assessee is not eligible for deduction The Ld. Counsel did not object for rectification sought by the e parties and perused the relevant material on record. The Tribunal vide para 19 of the order directed the Assessing Officer to allow education cess paid by the assessee as deduction. The relevant finding of the Tribunal is 19. In so far the claim of the Ld. A.R that unlike “rates” and “taxes” the amount paid by an assessee towards “Education Cess” or any other “cess” viz. the Secondary and Higher Education Cess is not a disallowable x Act, 1961, we find, that the said issue is squarely covered by the recent order of the Hon’ble High Court of Bombay in the case of Sesa Goa Limited vs. Joint Commissioner of Income- tax (2020) 107 CCH 375 (Bom). The Hon’ble High Court had observed that e legislature in Sec. 40(a)(ii) had though provided that “any rate or tax levied” on “profits and gains of business or profession” shall not be deducted in computing the income chargeable under the head “Profits and gains of business or profession”, but th “cess”. Also, the High Court observed that there was no scope to accept that “cess” being in the nature of a “tax” was equally not deductible in computing the income chargeable under the head “Profits and gains of business or profession”. It was further observed that if the legislature would had intended to prohibit the deduction of amounts paid by an assessee towards say, “education cess” or any other “cess”, then, it could have easily included a reference to “cess” in cla the basis of its aforesaid observations the Hon’ble High Court had concluded that now when the legislature had not provided for any prohibition on the deduction of any amount paid towards “cess” in clause (ii) of Sec. 40(a), t reading something which is not to be found in the text of the provision of Sec. 40(a)(ii). Accordingly, the Hon’ble High Court had concluded that there was no prohibition on the deduction of any amount paid “cess” in Sec. 40(a)(ii) while computing the income chargeable under the head “Profits and gains of business or profession”. Accordingly, respectfully following the aforesaid judgment of the Hon’ble High Court of Bombay in the case of Sesa Gold Li the assessee’s claim that “Education Cess” and the “Secondary and Higher Education Cess” are allowable as a deduction u/s 40(a)(ii) of the Act. However, as the aforementioned claim had been raised by the the very first time before us, we, therefore, in all fairness restore the matter to the file of the A.O for considering the said claim of the assessee in the backdrop of our observations recorded hereinabove, though, subject to verification of M/s Motilal Oswal Financial Services MA No. 124/M/2022 deducted in computing the income chargeable under the head “Profits and gains of business or profession”, but then, there was no reference to any “cess”. Also, the High Court observed that there was no scope to accept that “cess” being in the nature of a “tax” was equally not deductible in computing the income chargeable under the head “Profits and gains of or profession”. It was further observed that if the legislature would had intended to prohibit the deduction of amounts paid by an assessee towards say, “education cess” or any other “cess”, then, it could have easily included a reference to “cess” in clause (ii) of Section 40(a). On the basis of its aforesaid observations the Hon’ble High Court had concluded that now when the legislature had not provided for any prohibition on the deduction of any amount paid towards “cess” in clause (ii) of Sec. 40(a), therefore, holding to the contrary would amount to reading something which is not to be found in the text of the provision of Sec. 40(a)(ii). Accordingly, the Hon’ble High Court had concluded that there was no prohibition on the deduction of any amount paid “cess” in Sec. 40(a)(ii) while computing the income chargeable under the head “Profits and gains of business or profession”. Accordingly, respectfully following the aforesaid judgment of the Hon’ble High Court of Bombay in the case of Sesa Gold Limited (supra), we are principally in agreement with the assessee’s claim that “Education Cess” and the “Secondary and Higher Education Cess” are allowable as a deduction u/s 40(a)(ii) of the Act. However, as the aforementioned claim had been raised by the the very first time before us, we, therefore, in all fairness restore the matter to the file of the A.O for considering the said claim of the assessee in the backdrop of our observations recorded hereinabove, though, subject to verification of the factual position as had been claimed by the assessee M/s Motilal Oswal Financial Services Ltd. MA No. 124/M/2022 4 deducted in computing the income chargeable under the head “Profits and en, there was no reference to any “cess”. Also, the High Court observed that there was no scope to accept that “cess” being in the nature of a “tax” was equally not deductible in computing the income chargeable under the head “Profits and gains of or profession”. It was further observed that if the legislature would had intended to prohibit the deduction of amounts paid by an assessee towards say, “education cess” or any other “cess”, then, it could use (ii) of Section 40(a). On the basis of its aforesaid observations the Hon’ble High Court had concluded that now when the legislature had not provided for any prohibition on the deduction of any amount paid towards “cess” in clause herefore, holding to the contrary would amount to reading something which is not to be found in the text of the provision of Sec. 40(a)(ii). Accordingly, the Hon’ble High Court had concluded that there was no prohibition on the deduction of any amount paid towards “cess” in Sec. 40(a)(ii) while computing the income chargeable under the head “Profits and gains of business or profession”. Accordingly, respectfully following the aforesaid judgment of the Hon’ble High Court of Bombay in mited (supra), we are principally in agreement with the assessee’s claim that “Education Cess” and the “Secondary and Higher Education Cess” are allowable as a deduction u/s 40(a)(ii) of the Act. However, as the aforementioned claim had been raised by the assessee for the very first time before us, we, therefore, in all fairness restore the matter to the file of the A.O for considering the said claim of the assessee in the backdrop of our observations recorded hereinabove, though, subject to the factual position as had been claimed by the assessee before us. The additional Ground is allowed for statistical purposes in terms of our observations recorded hereinabove. 4.1 Before us, the assessee amendment, has also deduction of the education cess assessee is reproduced as under: “5. Amendment made in the Finance Act, 2022 under section 40 (a)(li) by way of introduction of Explanation has effect from April 1, 2005 clarifying that the term "tax" shall include and shall be deemed to have always included any surcharge or cess, by whatever name called, on such tax. Respectfully following the retrospectively amended under section 40 (a)(ii), MOSL has not objected or filed appeal against the aforesaid order of the learned Assessing Officer. 4.2 We are of the opinion that in view of the retrospective amendment, the order the provisions of the law as on the date and therefore, mistake apparent from record. Accordingly, the order of the Tribunal is rectified and M/s Motilal Oswal Financial Services MA No. 124/M/2022 before us. The additional Ground is allowed for statistical purposes in terms of our observations recorded hereinabove.” Before us, the assessee in view of the retrospective has also accepted that the assessee is not eligible for deduction of the education cess. The relevant submission of the assessee is reproduced as under: Amendment made in the Finance Act, 2022 under section 40 (a)(li) by way of introduction of Explanation has retrospective operation with effect from April 1, 2005 clarifying that the term "tax" shall include and shall be deemed to have always included any surcharge or cess, by whatever name called, on such tax. Respectfully following the retrospectively amended law regarding non-allowability of education cess under section 40 (a)(ii), MOSL has not objected or filed appeal against the aforesaid order of the learned Assessing Officer.” We are of the opinion that in view of the retrospective order of the Tribunal becomes inconsistent with the provisions of the law as on the date and therefore, apparent from record. Accordingly, the order of the Tribunal is rectified and recalled. M/s Motilal Oswal Financial Services Ltd. MA No. 124/M/2022 5 before us. The additional Ground is allowed for statistical purposes in view of the retrospective the assessee is not eligible for relevant submission of the Amendment made in the Finance Act, 2022 under section 40 (a)(li) retrospective operation with effect from April 1, 2005 clarifying that the term "tax" shall include and shall be deemed to have always included any surcharge or cess, by whatever name called, on such tax. Respectfully following the allowability of education cess under section 40 (a)(ii), MOSL has not objected or filed appeal against the We are of the opinion that in view of the retrospective of the Tribunal becomes inconsistent with the provisions of the law as on the date and therefore, there is a apparent from record. Accordingly, the order of the 4.2 The ground of the assessee in cross deduction of education cess is respective amendment. 5. In the result, the Miscellaneous Application of the Revenue is allowed and the cross Order pronounced in Sd/- (SANDEEP SINGH KARHAIL JUDICIAL MEMBER Mumbai; Dated: 08/07/2022 Rahul Sharma, Sr. P.S. Copy of the Order forwarded to 1. The Appellant 2. The Respondent. 3. The CIT(A)- 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. //True Copy// M/s Motilal Oswal Financial Services MA No. 124/M/2022 ground of the assessee in cross-objection deduction of education cess is accordingly dismissed in view of respective amendment. In the result, the Miscellaneous Application of the Revenue is allowed and the cross-objection of the assessee is dismissed. ounced in the Court on 08/07/2022. Sd/- SANDEEP SINGH KARHAIL) (OM PRAKASH KANT JUDICIAL MEMBER ACCOUNTANT Copy of the Order forwarded to : BY ORDER, (Sr. Private Secretary ITAT, Mumbai M/s Motilal Oswal Financial Services Ltd. MA No. 124/M/2022 6 objection seeking the issed in view of In the result, the Miscellaneous Application of the Revenue is objection of the assessee is dismissed. OM PRAKASH KANT) MEMBER Sr. Private Secretary) ITAT, Mumbai