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TMI Blog1978 (12) TMI 37X X X X Extracts X X X X X X X X Extracts X X X X ..... in section 40(c) of the Income-tax Act, 1961, and that entire claim of payment was allowable ? 2. Whether, on the facts and in the circumstances of the case, there was material for the Tribunal to hold that the payment of commission on sale of sugar to the agents amounting to Rs. 1,81,104 was an admissible deduction ? 3. Whether, on the facts and in the circumstances of the case, the sum of Rs. 1,13,543 payable by the assessee-company as interest under section 3(3) of the U. P. Sugarcane (Purchase Tax) Act, 196 1, is an allowable deduction under section 37(1) or under section 28 of the Income-tax Act, 1961 ? 4. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the payment of Rs. 40 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 50 per cent. Both sides went up to the Tribunal. The Tribunal held : " In our view there was no justification for disallowing any part of the guarantee commission paid by the company to its directors or substantial shareholders. The commercial justification for giving guarantee by the directors to the banks cannot be gainsaid. The banks insisted on it and the directors and the substantial shareholders had to make allowance for it. There is no basis for the assumption of the Income-tax Officer that the guarantee was demanded by the banks as a kind of hostage from the directors. On the other hand, the guarantee demanded was as an additional security in case the assets of the private limited company or public limited company are lost due to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness needs of the company. The compensation paid was at the rate of 10% of the interest payable to bankers. It was not excessive. On facts, the tests laid down under cl. (c) of s. 40 are satisfied. We are in agreement with the Tribunal that the assessee was entitled to this deduction. The first question is hence liable to be answered in favour of the assessee. In relation to the second question, the matter stands concluded by a decision of this court in Jaswant Sugar Mills Ltd. v. CIT [1970] 78 ITR 154 (All). In similar circumstances a Bench of this court in that case held that the payment of commission on sale of sugar was in admissible deduction. We are bound by that decision. The second question is hence liable to be answered in favour ..... X X X X Extracts X X X X X X X X Extracts X X X X
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