Is education cess an allowable deduction?

IN THE INCOME TAX APPELLATE TRIBUNAL
BANGALORE BENCHES “C”, BANGALORE
Before Shri George George K, JM and Shri B.R.Baskaran, AM
IT(TP)A No.2616/Bang/2019 : Asst.Year 2010-2011
IT(TP)A No.2617/Bang/2019 : Asst.Year 2011-2012

M/s.Waters (India) Private Limited
No.36A, 2nd Phase,
Peenya Industrial Area
Bengaluru – 560 058.
PAN : AAACW1411C.

vs

The Dy.Commissioner of
Income-tax, Circle 12(5)
Bangalore.

Appellant by : Smt.G.Vaidehi, Adovcate
Respondent by : Sri.Priyardarshi Mishra, Addl.CIT-DR

Date of Hearing : 28.09.2021

Date of Pronouncement : 01.10.2021

O R D E R

ITA No.2616/Bang/2019 (Asst. Year 2010-2011)

The CIT(A) has erred in confirming the transfer pricing adjustment of Rs,2,96,59,931 in respect of payment made by the assessee for intra group services.

2. The assessee is a company, which is a wholly owned subsidiary of Waters Technologies Corporation, USA. For the assessment year 2010-2011, the assessee had undertaken various international transactions with its Associate Enterprises (AEs). The assessee during the assessment year, had made payment of management charges amounting to Rs.2,96,59,931 to Waters S.A. France. The assessee submitted that these payments are towards service received by the assessee. The Transfer Pricing Officer (TPO) concluded that the Arm’s Length Price (ALP) of payment of management charges is `Nil’.

3. Aggrieved by the order of the AO / TPO in holding that the payment made by the assessee amounting to Rs.2,96,59,931 as `Nil’ ALP, the assessee preferred an appeal to the first appellate authority.

 IT(TP)A No.2617/Bang/2019 : Asst. Year 2011-2012

4. Three issues are raised in this appeal – (i) transfer pricing adjustment; (ii) corporate tax issue u/s 40(a)(i) of the I.T.Act; and (iii) whether education cess is allowable expenses (additional ground). The three issues raised in this appeal are adjudicated in our order for assessment year 2010-2011 (supra).

5. Therefore, for the reasons mentioned in para 3.5 to 3.7 (supra), we restore the issue of TP adjustment to the files of the AO / TPO. As regards disallowance made u/s 40(a)(i) of the I.T.Act, the issue is restored to the files of the AO / TPO for de novo consideration in view of our reasoning in para 4.4 to 4.6 (supra). As regards additional ground is concerned, for our reasoning mentioned in para 6 (supra), we hold that education cess is to be allowed as deduction. It is ordered accordingly.

6. In the result, the appeals filed by the assessee for assessment year 2010-2011 and 2011-2012 are partly allowed.
Order pronounced on this 01st day of October, 2021.

Please find attached the enclosed file for the full judgement