TMI Blog1996 (1) TMI 35X X X X Extracts X X X X X X X X Extracts X X X X ..... this reference arising under section 256(1) of the Income-tax Act, 1961 (for short the "Act"), the following two questions are referred for our opinion : " (1) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in law in holding that the amount received by the assessee from the MMTC cannot be considered as income of the assessee ? (2) Whether, on the fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tance of the assessee to ensure the vendor of due payment of the instalments. The assessee had paid guarantee commission to the bank and that amount was claimed as an allowable revenue expenditure. The Assessing Officer disallowed the claim and held the same to be capital in nature. On appeal, the Commissioner of Income-tax (Appeals) allowed the claim. When the matter was carried to the Tribunal b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decisions relied upon by him. The proposition put forth by him is that all expenditure including one incurred in connection with the acquisition of a capital asset should be necessarily treated as capital expenditure. Any expenditure incurred in acquiring a capital asset should necessarily be treated as capital in nature, even expenditure of a revenue nature may, under set of circumstances, but t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cess of constructing and erecting its plant, the interest incurred before its commencement of production on such borrowed money can be capitalised and added to the cost of the fixed assets which has resulted in such expenditure. Thus, what would determine as capital expenditure is the expenditure incurred for bringing into existence the asset in question and such expenditure alone can be treated a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 37 ITR 389 or CIT v. Mihir Textiles [1994] 206 ITR 112 could be followed by us. We would rather prefer to adopt the view expressed in Sivakami Mills' case [1979] 120 ITR 211 (Mad) and Akkamba Textiles' case [1979] 117 ITR 294 (AP). Thus, we answer the second question referred for our opinion in the affirmative and against the Revenue. Reference is answered accordingly. - - TaxTMI - ..... X X X X Extracts X X X X X X X X Extracts X X X X
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