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2018 (10) TMI 1106 - AT - Income TaxDisallowing bank guarantee expenses u/s 37(1) - CIT-A treating the same as capital in nature - Held that:- We note that the authorities below erred in not allowing the deduction of the commission expenses either as revenue or in the form of depreciation. The expenditure is treated as capital in nature if there arises some fixed assets out of such expenditure but it is not so in the case before us. Once, the assessee has incurred any expense in connection with its business then he has liable for deduction either in the form of revenue expenses, preliminary expenses or depreciation. As we note that no benefit has arisen to the assessee out of such expenses which is enduring in nature. Therefore we are inclined not to treat such expenses as capital in nature. The bank guarantee was furnished by the assessee for satisfactory performance of the work assigned to it. Therefore, in our considered view, it is directly linked with the trading/revenue activities of the assessee. Therefore we are of the view that such expenditure should be treated as revenue in nature. In holding so, we find support and guidance in the case of Neo structo construction Ltd. [2013 (7) TMI 851 - GUJARAT HIGH COURT], thus we note that if performance guarantee has forfeited by the concern party then the same is allowable as deduction to the assessee. - decided in favour of assessee.
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