Law:

Section:

Section 37(1) of the Income-tax Act, 1961-Business expenditure-Assessee paid guarantee commission to a bank for accepting usance bills under IDBI scheme for purchase of machinery and for giving guarantee to sales tax department for stay op disputed tax-Whether said payments were allowable as business expenditure-Held, on facts, yes Facts The assessee paid a sum as guarantee commission to a bank for accepting usance bills under the IDBI Scheme for purchase of certain machinery and also for giving guarantee to the Commercial Taxes Department for getting stay of disputed sales tax. The Tribunal held that all these sums were deductible as revenue expenditure. On reference : Held As far as the first amount of commission paid for acceptance of usance bills was concerned, the matter had already been decided in Sivakami Mills Ltd. v. CIT [1979] 120 ITR 211 (Mad.) and, hence, the same was deductible. As far as the amount paid for giving guarantee to the Commercial Taxes Department was concerned, it would stand on a fortiorifooting, because sales tax is a revenue liability and the guarantee commission paid for discharging a revenue liability would clearly be revenue in nature. Hence, this second amount of guarantee commission too was deductible as revenue expenditure. Case referred to Sivakami Mills Ltd. v. CIT [1979] 120 ITR 211 (Mad.). JUDGMENT Sethtjraman J.-The following question has been referred by the Tribunal under section 256(1) of the Income-tax Act, 1961 : "Whether, on the facts and in the circumstances of the case, it has been rightly held by the Tribunal that the guarantee commission paid of Rs. 14,003 in acquiring certain machinery in the assessee's case and for stay of tax is an admissible deduction under section 37 of the Income-tax Act, 1961, for the…

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