Law:

Section:

(I) Section 37(1) of the Income-tax Act, 1961 [Corresponding to section 10(2)(xv) of the Indian Income-tax Act, 1922] - Business expenditure - Allowability of - Whether in view of decision of Supreme Court in Travancore Titanium Products Ltd. v. CIT [1966] 60 ITR 277 amount of wealth-tax paid by assessee was not allowable deduction under section 10(2)(xv) - Held, yes (II) Section 33 of the Income-tax Act, 1961 [Corresponding to section 10(2)(vib) of the Indian Income-tax Act, 1922] - Development rebate - Assessment year 1960-61 - Assessee claimed guarantee commission paid to bank in connection with purchase of machinery from British concern which insisted on bank guarantee as part of actual cost for purpose of development rebate under section 10(2)(vib) - Whether since payment of commission to bank was essential for acquisition of machinery which assessee had ordered, it had to be treated as part of assessee's actual cost' for purpose of allowance of development rebate - Held, yes (I) FACTS Tribunal held that amount of wealth paid by assessee in relevant previous year was allowable deduction under section 10(2)(xv). (II) FACTS For the assessment year 1960-61, the assessee claimed development rebate on the sum of Rs. 36,000 which the assessee had paid to the Allahabad Bank Ltd. The assessee had placed an order with a British concern for the purchase of a machinery worth Rs. 48 lakhs. The British supplier required a guarantee to be given and the assessee approached the Allahabad Bank Ltd. to secure the guarantee. The bank agreed to be the guarantor for the sum of Rs. 48 lakhs for a consideration of Rs. 36,000 to be paid to the bank as guarantee commission. The question arose whether this sum of Rs. 36,000 should be treated as part of the actual cost to the assessee of the new machinery acquired by it for the purpose of allowance of development rebate in terms of section 10(2)(vib) of the Indian Income-tax Act, 1922. The Tribunal held in favour of the assessee. On reference : (I) HELD In view of the Supreme Court in Travancore Titanium Products Ltd. v. CIT [1966] 60 ITR 277 Tribunal was not right in holding that the amount of wealth-tax paid by the assessee in the…

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