JUDGMENT:

KAPADIA, J. -- These civil appeals are filed by the Department against decision dated 25.4.01 in Tax Appeal Nos.39 and 40 of 2001 delivered by Gujarat High Court.

2. Two questions of law arise for determination in these civil appeals which are as follow:

(1) Whether "commitment charges" can be allowed as deduction under Section 36(1)(iii) of the Income-tax Act, 1961?

(2) Whether "charges" paid to COFACE is similar to payment of interest under Section 36(1)(iii) of the Income-tax Act, 1961 and, therefore, has to be allowed as deduction?

3. Regarding question No.(1), we may state that assessee had borrowed Rs.30 crores (approximately) from IDBI which in turn was refinanced by COFACE which foreign company had charged interest, commitment charges and insurance charges payable by the assessee. The said "commitment charges" was upfront payment. We have also examined the contract between IDBI and the assessee. In the case of Addl. Commr. of Income-tax v. Akkamamba Textiles Ltd. (1997) 227 ITR 464, this Court has held that commission paid by the assessee to the banker and the insurance company was admissible deduction under Section