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Judgment
Sethuraman, J.—The following question has been referred by the Tribunal under s, 256(1) of the I. T. 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 u/s 37 of the Income Tax At, 1961, for
the assessment year 1970-7 ?
The question, in so far as it refers to ""for stay of tax"", is not happily worded. A sum of Rs. 14,003 was paid as guarantee commission to the
Bank of Madura. The break-up of the amount for the several items are as follows :
Rs.
(1) For accepting usance bills under
Industries Development Bank of India Scheme
(IDBI) for purchase for four numbers of
Doubling Frames ...... 6,078.74
(2) For accepting usance bills under Industrial
Development Bank of India Scheme (IDBI) for
purchase of drafting conversion materials for
Ring Frames ....... 6,679.72
(3) For giving guarantee to the Commercial Taxes
Department for getting stay of disputed sales
tax 1,245.00
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Total ...14,003.46
It may be seen that the first two amounts represent the commission paid for importing machinery and the third item is for the purpose of
complying with a condition in the order granting stay of collection of tax pending disposal of the appeal or other proceedings on sales tax.
As far as the first two amounts are concerned, the matter has already been decided in Sivakami Mills Ltd. Vs. Commissioner of Income Tax, .
As far as the third amount is concerned, it would stand on an a fortiori footing, because sales tax is a revenue liability and the guarantee commission
paid for discharging a revenue liability would clearly be revenue.
The result is that the question referred is answered in the affirmative and in favour of the assessee. There will be no order as to costs.