2017 (7) TMI 106

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..... ORDER PER COURT 1] The matter pertains to the Assessment Year 198485. 2] Reference is made to this Court on the following question. "Whether on the facts and in the circumstances of the case, the Appellant Tribunal was justified in law in holding that the entire guarantee commission paid to the bankers for securing timely repayment of credit facility and loan from Financial Institutions for t .....

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..... h has relied on the judgment of the Apex Court in a case of India Cements Ltd. vs. CIT, reported in (1996) 60 ITR 52 (SC). The learned counsel also relies on the another judgment of the Division bench of this Court in Income Tax Reference No.752 of 1998. 5] The learned counsel for the Revenue submits that relevant question is whether production had commenced pursuant to the acquisition of the sai .....

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..... upra) the Madras High Court also held that guarantee commission paid to a bank for obtaining a loan for acquisition of machinery was a revenue expenditure. While saying so, the High Court summed up the reasoning in support of its conclusion as follows : "The expenditure incurred for the purchase of the machinery was undoubtedly capital expenditure, for it brought in an asset of enduring advanta .....

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..... not a capital expenditure. The Tribunal, in our opinion, committed a manifest error of law in holding it to be a capital expenditure. We accordingly answer the question referred to us in the negative, i.e., in favour of the assessee and against the Revenue." 8] The undisputed facts as has been referred in the reference is that the Assessee is a existing running company engaged in the business o .....

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..... se, the Assessee had to pay guarantee commission for securing timely repayment of credit facility obtained for the purpose of machinery and equipments required for running business. This Court considering various judgments of the Apex Court categorically came to the conclusion that the expenditure incurred for payment of guarantee commission is revenue expenditure. The act of borrowing money was i .....

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