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TMI Blog2016 (10) TMI 325X X X X Extracts X X X X X X X X Extracts X X X X ..... challan in that regard and has produced the same in this appeal as Annexure A-9. The assessee sought to produce the same before the Tribunal, but the Tribunal did not permit it to do so. In our opinion, this was a fit case for the Tribunal to have exercised its powers under Rule 29 of the Appellate Tribunal Rules, 1963 requiring the production of the challan evidencing the payment of the tax deducted at source in the government treasury. All that was required was to direct the authorities to examine whether the challan was genuine and whether the amount was paid into the government treasury or not in accordance with law. The ends of justice certainly required the same. Even if the assessee had contended before the Assessing Officer and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 37 of the Act being the commission paid by it to the State of Haryana in respect of a guarantee issued by the State of Haryana at the appellant s request in favour of the Housing Urban Development Corporation Limited (HUDCO). 4. The Assessing Officer disallowed the expenditure treating the same as capital expenditure. The Assessing Officer also disallowed an amount of Rs. 4,03,129/- under Section 40(a)(ia) on the ground that the appellant/assessee had failed to deduct tax at source in respect of certain payments. 5. The appeal is admitted on the following substantial questions of law:- (a) Whether Guarantee Fee can be allowed deduction under Section 37 of the Income Tax Act? (b) Whether in view of the facts and circums ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d) 9. The Supreme Court in Commissioner of Income Tax Vs Sivakami Mills Ltd. [1997] 227 ITR 465 held:- Civil Appeal No. 6488 of 1983 1. Heard learned counsel for the parties. 2. The short question that arises for our consideration in this appeal is whether the guarantee commission paid by the assessee is a revenue expenditure and hence allowable as deduction in computing the total income in the Assessment Year 1968-69. The High Court answered the question in favour of the assessee. It was held that the guarantee commission paid by the assessee was a revenue expenditure and hence allowable as a deduction in computing the total income. The Revenue has come in appeal. 3. A similar question arose before the Andhra Pradesh High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the judgement of the Supreme Court, it would make no difference as far as the guarantee commission is concerned. As we mentioned earlier, the guarantee was issued by the State of Haryana at the assessee s request in favour of HUDCO. 11. Mr. Putney, however, relied upon the judgement of the Patna High Court in Chhabirani Agro Industrial Enterprises Ltd. Vs Commissioner of Income Tax [1991] 191 ITR 226. This judgement was prior to the judgement of the Supreme Court in Commissioner of Income Tax Vs Sivakami Mills Ltd. The Patna High Court dissented from the view taken by the Madras High Court in Sivakami Mills Ltd. Vs Commissioner of Income Tax . In that case also, the ITO disallowed the expenditure relating to the bank guarantee co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the payment of guarantee commission was a revenue expenditure. The reasons assigned are, (i) it is the option of the assessee to evolve the mode of capitalising the cost of the capital asset, (ii) the rule of determining the cost of the capital assets laid down in Challapalli's case [1975] 98 ITR 167 (SC) will apply only for the period prior to the commencement of production, (iii) the bank guarantee commission was paid only, as a business exigency and as such was an integral part of the conduct of the business, and (iv) the guarantee commission per se does not itself bring into existence any asset of enduring nature. With respect, I find myself unable to agree with this view. In view of the law laid down by the Supreme Court in Chal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Ltd. Vs Commissioner of Income Tax . However, thereafter, the Supreme Court upheld the view taken by the Madras High Court in Commissioner of Income Tax Vs Sivakami Mills Ltd. We are bound by the view taken by the Supreme Court in Commissioner of Income Tax Vs Sivakami Mills Ltd. 12. Question (a) is, therefore, answered in favour of the assessee. The appeal to that extent is allowed. Re: Question (b) 13. If indeed the assessee was bound to deduct tax at source and did not do so, the assessment order disallowing the expenditure relating to the relevant payments must be upheld. 14. The assessee, however, alleges to have discovered later that it had in fact deducted the tax at source and paid the same to the government tr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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