1996 (1) TMI 35 - HC - Income Tax

Summary

Issues:
1. Whether the amount received by the assessee from MMTC can be considered as income.
2. Whether the guarantee commission paid by the assessee is an admissible revenue expenditure.

Analysis:
1. The court had already answered a similar matter in a different case and held that the amount received by the assessee from MMTC cannot be considered as income, ruling in favor of the assessee.

2. The second question revolved around the guarantee commission paid by the assessee, which was claimed as an allowable revenue expenditure. The Assessing Officer disallowed the claim, deeming it capital in nature. However, the Commissioner of Income-tax (Appeals) allowed the claim. The Tribunal upheld the appellate authority's decision based on previous judgments. The Department disagreed and relied on different decisions to argue that all expenditure related to acquiring a capital asset should be treated as capital expenditure. The court referred to the Supreme Court's decision in Challapalli Sugars Ltd. v. CIT [1975] 98 ITR 167, emphasizing that only expenditure necessary to bring an asset into existence should be considered capital. In this case, the guarantee was not for acquiring the asset but for securing a loan, making the commission a revenue expense. The court disagreed with the Gujarat High Court's view and preferred the stance taken in previous cases. Therefore, the court ruled in favor of the assessee, considering the guarantee commission as an admissible revenue expenditure.

Conclusion:
The court answered both questions in favor of the assessee, holding that the amount received from MMTC cannot be considered as income and that the guarantee commission paid is an admissible revenue expenditure.