Midland Credit Management India Pvt. Ltd. Vs Addl. CIT (ITAT Delhi)
Assessee by way of additional ground has claimed deduction of cess on the ground that the same is not covered under section 40(a)(ii) of the Act.
The Hon’ble High Court of Bombay at Panaji bench in the case of Sesa Goa 423 ITR 426 had the occasion to consider a similar issue and has held as under:
“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 the words through and see if the rule is clearly stated. If the language employed gives the rule in words of sufficient clarity and precision, nothing more requires to be done. Indeed, in such a case the task of interpretation can hardly be said to arise :Absoluta sententia expositore non indiget. The language used by the Legislature best declares its intention and must be accepted as decisive of it. 19. Besides, when it comes to interpretation of the IT Act, it is well established that no tax can be imposed on the subject without words in the Act clearly showing an intention to lay a burden on him. The subject cannot be taxed unless he comes within the letter of the law and the argument that he falls within the spirit of the law cannot be availed of by the department. [See CIT vs Motors & General Stores 66 ITR 692 (SC)]. 20. In a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied, into the provisions which has not been provided by the legislature [See CIT Vs Radhe Developers 341 ITR 403 ]. One can only look fairly at the language used. No tax can be imposed by inference or analogy. It is also not permissible to construe a 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 the provision for deduction, exemption or relief should be interpreted liberally, reasonably and in favour of the assessee and it should be so construed as to effectuate the object of the legislature and not to defeat it. Further, the interpretation cannot go to the extent of reading something that is not stated in the provision [See AGS Tiber Vs CIT 233 ITR 207]. 22. Applying the aforesaid principles, we find that the 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 the income chargeable under the 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 the nature of a “Tax” is equally not deductable in computing the income chargeable under the head “profits and gains of business or profession”. Acceptance of such a contention will amount to reading something in the text of the provision which is not to be found in the text of the provision in Section 40(a)(ii) of the IT Act. 23. If the legislature intended to prohibit the deduction of amounts paid by a Assessee towards say, “education cess” or any other “cess”, then, the legislature could have easily included reference to “cess” in clause (ii) of Section 40(a) of the IT Act. The fact that the legislature has not done so means that the legislature did not intend to prevent the deduction of amounts paid by a Assessee towards the “cess”, when it comes to computing income chargeable under the head “profits and gains of business or profession.”
Respectfully following the decision of the honourable High Court of Bombay we direct for allowing deduction for cess.
FULL TEXT OF THE ITAT JUDGEMENT
The above cross appeals by the assessee and the revenue are preferred against the order of the CIT(A) – 44, New Delhi dated 28.12.2016 pertaining to A.Y 2010– 11. Both these appeals were heard together and are being disposed of by this common order for the sake of convenience and brevity.
2. We will first take up assessee’s appeal in ITA No. 3892/DEL/2017.
3. At the very outset, let us understand the business profile of the The main function performed by the assessee pertains to making outbound collection calls to debtors for recovery of US consumer debts while adhering to the necessary laws and regulations that are relevant to debt collection activities. Further, the assessee also renders services for the bankruptcy vertical of Encore US and undertakes certain tasks pertaining to bankruptcy management services rendered by Encore US.
4. International transactions reported by the assessee are as under:
i) Provision of ITES Rs. 6,53,19,30,694/-
ii) Purchase of fixed asset and other goods Rs. 38,63,381 /-
5. The assessee has used TNMM with OP/TC as the PLI and has arrived at a set of 7 companies under ITES segment with an average margin of 7.41%. The assessee workedout its own margin at 21.87%. Based on the analysis, international transaction was reported at arm’s length.
6. During the transfer pricing assessment proceedings, the Assessing Officer rejected the following comparables used by the assessee:
1. R System International Limited – for the reason that this company is having financial year ending other than March.
2. Aditya Birla Minacs Worldwide Ltd. – This company was found having significant segment RPT at 33.5% and also failed the export sales filter.
3. CG VAK Software and Exports Ltd – This company was rejected on the ground that under the ITES segment, sale was just Rs. 82.78 lakhs and hence segment does not pass turnover filter.
4. The CEFA Imaging Pvt Ltd – This company was rejected for the reason that it was engaged in several e-publishing services.
5. Informed Technologies India Ltd – This company did not pass turnover filter and hence rejected.
7. After rejecting the afore-mentioned comparables of the assessee, the Assessing Officer finally determined the ALP of the international transaction by including other comparable companies as under:
