1. Dispute regarding the deductibility of guarantee commission and interest on deferred payments as revenue expenditure for computing total income. (Para 2 , 4 )
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1997 Supreme(SC) 191
SUPREME COURT OF INDIA
K S Paripoornan, S B Majmudar
COMMISSIONER OF INCOME TAX, APPELLANT
VERSUS
SIWAKAMI MILLS LTD., RESPONDENTS.
Civil Appeals No. 6488 of 1983 with No. 9542 of 1995, decided on February 4, 1997.
Important Points
The main legal point established in the judgment is that guarantee commission paid by the assessee was considered a revenue expenditure and hence allowable as a deduction in computing the total income.
Subject
Taxation Law - Deductions and Exemptions
Act Referred
Headnote
Guarantee Commission - Revenue Expenditure - The court held that the guarantee commission paid by the assessee was a revenue expenditure and hence allowable as a deduction in computing the total income.
Fact of the Case:
The court considered whether the guarantee commission paid by the assessee is a revenue expenditure and hence allowable as a deduction in computing the total income in the Assessment Year 1968-69.
Finding of the Court:
The court found in favor of the assessee, holding that the guarantee commission paid was a revenue expenditure and hence allowable as a deduction in computing the total income.
Issues: The main issue was whether the guarantee commission paid by the assessee is a revenue expenditure and hence allowable as a deduction in computing the total income.
Ratio Decidendi: The court relied on previous decisions and held that the guarantee commission paid was a revenue expenditure and hence allowable as a deduction in computing the total income.
Final Decision: The appeal was dismissed, and the court held that the guarantee commission paid by the assessee was a revenue expenditure and hence allowable as a deduction in computing the total income.
Legal Category Hierarchy
Table of Contents
2. Whether guarantee commission and interest on deferred payments are revenue expenditures allowable as deductions in computing total income. (Para 2 , 4 )
3. The court relied on precedents establishing that guarantee commission and interest on deferred payments are revenue in nature. (Para 3 , 4 )
4. Guarantee commission and interest on deferred payments paid to banks are revenue expenditures allowable as deductions in computing total income. (Para 3 , 4 )
6. Is guarantee commission paid by an assessee allowable as a revenue expenditure deduction?
Yes, guarantee commission paid by an assessee is considered revenue expenditure and is therefore allowable as a deduction in computing total income. (Para 2 , 3 , 4 )
7. Is interest on deferred payment paid to a bank allowable as a revenue expenditure deduction?
Yes, interest on deferred payment paid to a bank is of a revenue nature and is allowable as a deduction in computing total income. (Para 4 )
ORDER
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 asses see. 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 Court in CIT v. Akkamba Textiles Ltd. ((1979) 117 ITR 294 (AP) The Court held that the expenditure incurred is revenue in nature and so allowable as deduction. Civil Appeal No. 2832 of 1977 preferred against the said decision was dismissed by this Court. In view of the aforesaid decision we see no force in this appeal. Accordingly this appeal is dismissed. There will be no order as to costs. Civil Appeal No. 9542 of 1995
4. The question is regarding the deduction of interest on deferred payment and guarantee commission paid to the Bank. The High Court followed its earlier decision in Sivakami Mills Ltd. v. CIT ((1979) 120 ITR 211 (Mad)) and answered the question in favour of the assessee. It was held that both the payments are of revenue nature. We have dismissed the appeal preferred against the decision of the High Court rendered in Sivakami Mills Ltd. CIT ((1979) 120 ITR 211 (Mad)) in Civil Appeal No. 6488 of 1983. In view of the said decision, this appeal is also dismissed. There will be no order as to costs.
