2013 (10) TMI 931 - SC - Income Tax

Interpretation of Section 36 to allow guarantee commission as deduction - high court has decided in favor of assessee 2013 (10) TMI 878 - BOMBAY HIGH COURT - Held that - matter remanded back to HC for fresh disposal after condoning the delay following Commissioner of Income Tax vs. Essar Projects Ltd 2013 (7) TMI 422 - SUPREME COURT . Regarding allowance of interest paid on inter-corporate deposits by interpreting section 36(1)(iii) and allowance of enhancement of lease rental u/s 37 are pure - held that - those are the questions which have been decided by the Tribunal as well as by the High Court purely on facts.

Summary

Issues:
1. Interpretation of Section 36 of the Income Tax Act regarding guarantee commission.
2. Interpretation of Section 43(2) of the Income Tax Act regarding loss on revaluation of foreign currency.
3. Interpretation of Section 36(1)(iii) of the Income Tax Act regarding interest paid on inter-corporate deposits.
4. Interpretation of Section 37 of the Income Tax Act regarding enhancement of lease rental.

Analysis:

1. The High Court dismissed the Income Tax Appeal and answered four questions in favor of the assessee. The Supreme Court granted leave and heard arguments from the Solicitor General and the respondent's counsel. The Court focused on the interpretation of Section 36 and other provisions of the Income Tax Act related to guarantee commission claimed by the assessee.

2. The Court noted that the Revenue did not press for an answer regarding the interpretation of Section 43(2) of the Income Tax Act concerning the loss on revaluation of foreign currency. The Court decided not to entertain questions related to Section 36(1)(iii) and Section 37, as these were deemed to be decided on factual grounds by the Tribunal and the High Court.

3. Regarding the interpretation of Section 36 and other provisions of the Income Tax Act concerning interest paid on inter-corporate deposits, the Court referred to a previous decision in a related case. The Court remanded the matter back to the High Court to decide the question afresh in accordance with the law and after providing an opportunity for both parties to be heard.

4. The Supreme Court allowed the appeal concerning the interpretation of Section 36 and remanded the matter back to the High Court for fresh consideration. The Court set aside the findings on this issue and directed the High Court to decide the question afresh. No costs were awarded in this matter, and the Civil Appeal was disposed of accordingly.