Allowability of Education cess – Puzzle for judiciary, dilemma for taxpayers

Kinjesh Thakkar & Saurav Gada – [2021] 133 taxmann.com 227 (Article)

Education cess was introduced for the first time by the Finance Bill 2004. The specific objective of introduction of such cess was to finance the Government’s commitment to universalize quality basic education. The Finance Bill 2004 further stipulated that the Central Government may, after due appropriation made by the Parliament, utilize the money of education cess only for the aforesaid stated objective.
The issue of tax deductibility of education cess has been a matter of much debate and discussion amongst the fraternity, there have been judgements available on both sides of the spectrum. In this article, the authors have elucidated both the views while primarily focusing on how despite the adverse judgement passed by the ITAT, the claim of deduction of education cess is still debatable.

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