9911796707
TMI Blog1997 (10) TMI 92X X X X Extracts X X X X X X X X Extracts X X X X ..... r the purpose of the business of the assessee. The AO disallowed the claim as he was of the view that the expenditure cannot be treated as business expenditure because the payment was made to obtain stock which was seized by the Department as unaccounted. The assessee appealed. 3. Before the CIT(A), the assessee contended that there was no unaccounted stock as alleged by the AO. The AO did not dispute the payment of commission to bank. It was further contended that irrespective of the fact whether the stock was accounted for or otherwise, it was a trading asset of the assessee-firm which generated profit. It was also contended that the release of stock on bank guarantee was made by the Department when it was pleaded that the value of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n reported in (1993) 109 CTR (Del) 40 : (1993) 200 ITR 544. It is contended that the facts in the reported decision are not relevant to the present case. It is contended that the CIT(A) ought to have appreciated that the bank guarantee commission paid by the assessee to get the seized unaccounted goods released from the Department cannot be called expenditure for the purpose of business or in the course of business. It is the contention of the learned Departmental Representative that the order of the CIT(A) be cancelled and that of the AO restored. 5. The learned counsel for the assessee strongly supported the order of the CIT(A) deleting the addition. It is contended that the bank guarantee was obtained under instructions and compulsion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned. The profit was offered for taxation. Therefore, it is pleaded that the expenditure could be held to be in connection with the business of the assessee. We have also gone through the case laws cited on behalf of the assessee. (i) In the case of Gogte Minerals the jurisdictional High Court has held that the guarantee agreement entered with bank not for acquiring an asset but for securing loan facility to pay amount on deferred payment basis is only financial arrangement and is revenue expenditure. (ii) in the case of Madras Industrial Investment Corpn. Ltd., the Hon'ble Supreme Court held: "reversing the decision of the High Court, that the liability to pay the discounted amount over and above the amount received for the debe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Wvg. Mills Co. Ltd. vs. CIT. But, in our opinion, this decision is distinguishable on facts. 7. In our opinion, the case law relied on behalf of the assessee do support its case. In this case, the assessee has paid bank guarantee only for releasing the goods which were seized by the Department in the course of the search. Therefore, the assessee was forced to pay the amount for releasing the goods and it is the case of the assessee that the goods were sold and earned profits and it was offered for taxation. Therefore, we agree with the contention of the assessee that the amount was paid in connection with its business. Therefore, it has to be treated as revenue expenditure and has to be allowed. In the circumstances, we uphold the or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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