The Delhi bench in (2021] 92 ITR (Trib) 434 following decisions of the coordinate benches in different regions like delhi Mumbai Pune Ahmedabad etc as well as the twin decisions of the High Courts of Bombay and Rajasthan while admitting an additional ground allowed deduction of education cess paid of around 5 crores by the company in its computation of income.
Upon their reading of sections 2(43), 37(1), 40(a) (ii),115JB and Board Circular No. 91/58/66-ITJ(19) dates 18 may 1967 the bench held that education cess is not of the nature described in sections 30 to 36, education cess is not in the nature of capital expenditure, education cess is not personal expense of the assessee, it is mandatory for it to pay education cess and for the purpose of computation of education cess, the income “tax” is taken as the criteria for computational purpose. Thus, the expense of education cess is mandatory expenses to be paid but does not fall under capital expense and personal expenditure and hence may be allowed as deduction.
The only exception is while computing book profits in case of a company where the term income tax is defined to include education cess for adjustments.
By far Apparently companies have turned aggressive in pressing for such claim for deduction.
Tax auditor in their report may take into account list of judicial pronouncements favouring taxpayer and exclude education cess amount from the list of inadmissible items in section 40(a) reporting in form 3CD also especially in the absence of any decision to the contrary.