Commissioner of Income Tax, (Central), Ludhiana vs Sobhag Textile (P.) Ltd.

N.K. Sud, J.—At the instance of the Revenue, the income tax Appellate Tribunal (Delhi Bench ''D'' New Delhi)(for short ''the Tribunal'') has referred the following question of law arising out of its order dated 26-9-1994 relating to assessment year 1988-89 for the opinion of this Court :-

Whether on the facts and in the circumstances of the case, the income tax Appellate Tribunal was right in law in holding the guarantee commission paid to Canara Bank against purchase of machinery through IDBI as not of capital nature?"

Before the Tribunal, Revenue had relied on the following judgments :-

(a) Sivakami Mills Ltd. v. CIT [1979] 120 ITR 211 (Mad.);

(b) CIT v. Metal Corpn. of India Ltd. [1982] 133 ITR 130 1 (Cal.);

(c) Addl. Commissioner of Income Tax Vs. Akkamba Textiles Ltd.,

On the other hand, the assessee relied on the view expressed by the Gujarat High Court in CIT v. Vallabh Glass Works Ltd. [1982] 137 ITR 389 1 and Commissioner of Income Tax Vs. Bharat Suryodaya Mills Co. Ltd.,

In view of the divergent opinions of the High Courts, the Tribunal applying the ratio of the decision of the Supreme Court in The Commissioner of Income Tax, West Bengal 1, Calcutta Vs. Vegetables Products Ltd., adopted the view in favour of the assessee.

Mr. D.S. Patwalia, learned counsel for the Revenue, has pointed out that the decision of the Andhra Pradesh High Court in Akkamba Textiles Ltd.''s case (supra) stands affirmed by the Supreme Court, as the appeal against the same has been dismissed in Addl. Additional Commissioner of Income Tax Vs. Akkamamba Textiles Ltd., . In view of the above, we answer the question in the negative, i.e., in favour of the Revenue and against the assessee.