Cess/Surcharge is not allowed as business expenditure u/s 37 of the IT Act, 1961

Last updated: 24 December 2022
Quick Summary
The Supreme Court has ruled that cess, including education cess, cannot be claimed as a business expenditure under Section 37 of the Income Tax Act, 1961. This decision was made in light of an amendment to Section 40(a)(ii) of the Act via the Finance Act 2022. The amendment clarifies that the term 'tax' includes any surcharge or cess, meaning such payments are not allowable deductions.

Court :
Supreme Court of India

Brief :
The Hon’ble Supreme Court ("the Supreme Court") in the case of Joint Commissioner of Income Tax v. M/s. Chambal Fertilizers & Chemicals Limited [SLP(C) No. 7379 of 2019] dated December 14, 2022, held that the term "tax" under Section 40(a)(ii) of the Income Tax Act, 1961 ("the IT Act") should also include cess.

Citation :
SLP(C) No. 7379 of 2019

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Bimal Jain
Published in Income Tax
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