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2011 (10) TMI 443 - HC - Income TaxAddition - Guarantee commission - AO on verification of documents with bankers came to the conclusion that the GC paid cannot be treated as an allowable expenditure u/s 37(1) of the Act - AO was of the view there was no scientific basis for payment of GC and it was a ploy to divert the income of the companies under his management - it is clear that the assessee has paid his Chairman Mr. Vijaya Mallya guarantee commission on the basis of the loan which they have obtained from the Banks - The payment of guarantee commission is not a remuneration under Section 309 of the Companies Act - assessee has chosen to pay its Managing Director the commission on the pretext of his standing as a guarantor in respect of the loans borrowed by the assessee from various banks - The expression "commercial expediency" is an expression of wide import and includes such expenditure as a prudent businessman incurs for the purpose of business - though the Chairman has stood as a guarantor in his personal capacity, the Banks have lent money not on the personal guarantee but on the assets of the Company which are offered as a security to the Bank. - It is not a lawful payment in the facts of the case and therefore, the Assessing Authority was fully justified in disallowing the said expenditure under Section 37 of the Act - Decided against the assessee
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