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TAXAP/32120/2008 5/ 5 ORDER
IN
THE HIGH COURT OF GUJARAT AT AHMEDABAD
TAX
APPEAL No. 321 of 2008
=========================================================
THE
COMMISSIONER OF INCOME TAX - II - Appellant(s)
Versus
MIHIR
TEXTILES LTD - Opponent(s)
=========================================================
Appearance
:
MRS
MAUNA M BHATT for
Appellant(s) : 1,MR MANISH R BHATT for Appellant(s) : 1,
None for
Opponent(s) :
1,
=========================================================
CORAM
:
HONOURABLE
MR.JUSTICE K.A.PUJ
and
HONOURABLE
MR.JUSTICE BANKIM.N.MEHTA
Date
: 24/07/2008
ORAL
ORDER
(Per
: HONOURABLE MR.JUSTICE K.A.PUJ)
The Revenue has filed
this Tax Appeal under Section 260A of the Income-tax Act, 1961 for
the assessment year 1991-92 proposing to formulate the following
substantial question of law:-
Whether
the Appellate Tribunal is right in law and on facts in confirming the
order passed b y the CIT(A) deleting the disallowance of
Rs.10,83,343/- made by the Assessing Officer in respect of bank
guarantee commission paid on account of excise duty and insurance
premium relating to plant and machinery, which was treated b y the
Assessing Officer as capital in nature ?
Mr. Manish R. Bhatt,
learned Standing Counsel has submitted that the Assessing Officer
made disallowance of Rs.10,83,343/- being the bank guarantee
commission paid on account of excise duty and insurance premium
relating to plant and machinery. The said expense was disallowed by
the Assessing Officer as being capital in nature.
Being aggrieved by the
said order the assessee went in Appeal before CIT(A) to delete the
said addition. Against this order the Revenue has filed an Appeal
before the Income-tax Appellate Tribunal and the Tribunal has upheld
the finding given by the CIT(A) and dismissed the Revenue’s Appeal.
While dismissing the Appeal, the Tribunal has observed that the
issue is covered in favour of the assessee by the decision of this
Court in the case of CIT vs. Bharat Suryodaya Mills Co. Ltd.,
reported in 202 ITR 942. Mr.Bhatt has further submitted that the
said issue has actually been decided in favour of the Revenue and
not in favour of the assessee as erroneously held by the Tribunal.
Be that as it may. Now
the issue is squarely concluded by the recent decision of the
Hon’ble Supreme Court in the case of Dy. Commissioner of
Income-tax vs. Gujarat Alkalies and Chemicals Ltd., reported in
(2008) 299 ITR 85 (SC), wherein the assessee had established
a phosphoric acid project as an extension to its existing business
activities. For that purpose it obtained foreign currency loan from
the IDBI which in turn was refinanced by COFACE subject to the
assessee paying commitment charges to COFACE. The department
disallowed deduction of commitment charges on the ground that
the payment was not in nature of interest. The Tribunal, however,
allowed the deduction under Section 37 of the Income-tax Act, 1961,
and the High Court on appeal affirmed the order of the Tribunal. On
Appeal to the Supreme Court, it was held while affirming the
decision of the High Court, that the commitment charges were
an admissible deduction under Section 37 and there was no infirmity
on the part of the Appellate Tribunal in allowing the deduction. The
Supreme Court has applied the ratio of earlier decision, Addl. CIT
Vs. Akkamamba Textiles Ltd., (1997) 227 ITR 464 (SC) and CIT Vs.
Sivarami Mills Ltd., (1997) 227 ITR 465 (SC). Since the bank
guarantee commission is also in the same nature of interest or
commitment charges it is allowable under Section 37 of the
Income-tax Act, 1961.
Since the issue is
squarely covered by the aforesaid decision there is no need to
formulate any question. The Appeal is accordingly dismissed.
(K. A. PUJ, J.) (B. N. MEHTA, J.)
kks
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