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2012 (10) TMI 841 - HC - Income TaxNature of expenditure - Revenue or Capital expenditure - Bank guarantee for commission paid by the assessee for securing timely repayment of the deferred credit facilities for buying machinery for its running business - Issued Deep Discount Bond (DDB) for financing the DND project - DDB holders were given an option under the offer to redeem the bonds in the 5th or 9th year of its allotment – Company entered into an agreement with another company the take out assistance against charges @ 1.6% per annum – Held that:- Following the decision in case of India Cements Limited (1965 (12) TMI 22 - SUPREME COURT) that the 'take out assistance fees' computed @ 1.6% per annum of the respective amount to take out obligation of both the entities were by way of guarantees on an exit option, independent of the financial position of the assessee company. The fees covers the event, in which the assessee-company may not have sufficient cash flow at the time of premature redemption of the DDBs after the end of the 5th and 9th year respectively at a pre-determined price. The guarantee fee was by way of assistance from financial institution; it was not an asset or advantage of an enduring nature. In favour of assesse
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