COMMISSIONER OF INCOME-TAX V. AMBICA MILLS LIMITED

ITR/211/1985

AI Insights

The case involves the Commissioner of Income-Tax as the petitioner and Ambica Mills Limited as the respondent. The primary legal issue addressed was whether the bank guarantee commission paid for deferred payment on machinery purchase qualifies for investment allowance and development rebate under the Income Tax Act, 1961. The Revenue contended that such expenses are revenue expenditures and do not qualify for capital allowances. The assessee, Ambica Mills, had previously been granted these allowances, which the Revenue challenged. The High Court's decision relied heavily on the Supreme Court's ruling in Sivakami Mills Ltd., which found similar expenditures to be revenue in nature.

• Counselvise Citation: [2000] 140 COUNSELVISE.COM (IT) 734276 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 07-11-2000
• Assessment Year: misc
• Other Referred Cases: C.I.T. Vs. Sivakami Mills Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Assessee Lawyers: B B NAIK; MANISH BHATT
• Keywords: Bank guarantee commission; Capital expenditure; Development rebate; Investment allowance; Revenue expenditure
• Section: 37(4)

Judgement Text

" IN THE HIGH COURT OF GUJARAT AT AHMEDABAD INCOME TAX REFERENCE No 211 of 1985 For Approval and Signature: Hon'ble CHIEF JUSTICE MR DM DHARMADHIKARI and Hon'ble MR.JUSTICE M.S.SHAH ============================================================ 1. Whether Reporters of Local Papers may be allowed : NO to see the judgements? 2. To be referred to the Reporter or not? : NO 3. Whether Their Lordships wish to see the fair copy : NO of the judgement? 4. Whether this case involves a substantial question : NO of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder? 5. Whether it is to be circulated to the Civil Judge? : NO -------------------------------------------------------------- COMMISSIONER OF INCOME-TAX Versus AMBICA MILLS LIMITED -------------------------------------------------------------- Appearance: MR B.B.Naik with MANISH R BHATT for Petitioner SERVED BY RPAD - (N) for Respondent No. 1 -------------------------------------------------------------- CORAM : CHIEF JUSTICE MR DM DHARMADHIKARI and MR.JUSTICE M.S.SHAH Date of decision: 07/11/2000 ORAL JUDGEMENT (Per : CHIEF JUSTICE MR DM DHARMADHIKARI) This Reference has been made of following questions at the instance of the Revenue and at the instance of the assessee. The only question referred at the instance of the Revenue is:- \"1. Whether, investment allowance and development rebate can be granted on the Bank Guarantee Commission paid in respect of deferred payment of outstanding amount on purchase price of machinery treated as `capital expenditure?\". 2. At the instance of the assessee, the following questions have been referred:- \"2. Whether, the Appellate Tribunal has not erred in law and on facts in holding that the expenditure of Rs.32,621/- and Rs.38,498/- for A.Ys. 1977-78 and 1978-79 respectively was admissible to the assessee and it cannot be considered to be hit by the provisions of section 37(4) of the I.T. Act, 1961?\" \"3. Whether, the assessee is entitled in law to the allowance of Rs.1,88,743/- though no demand was raised by the Customs Authority?\". \"4. Whether, on the facts and in the circumstances of the case, the finding of the Appellate Tribunal that the creation of liability cannot wait till the demand notice is received and the amount of Rs.1,88,743/- has to be allowed on the basis of a provision made because the customs duty becomes payable on import is correct in law?\". \"6. Whether, Investment allowance on the machinery worth Rs.2,54,380/- is not admissible under the Act?\". \"7. Whether, the payment of sur-tax is not admissible expenditure while computing the total income?\". \"8. Whether, the factory road could not be treated as plant and therefore no investment allowance in respect of the cost of road was admissible?\". As dealt with in Para 6 to 13 on the statement of case of the Tribunal, we need not go in the questions referred by the assessee as despite notice the assessee has failed to appear. It appears that he is no longer interested in seeking answers of those questions. We, therefore, confine this order to only question referred at the instance of the Revenue. 3. Learned Counsel Shri B.B.Naik appearing for the Revenue relies on the decision of C.I.T. Vs. Sivakami Mills Ltd. reported in 1997 227 ITR 405, wherein it has been held that bank guarantee commission paid in respect of deferred payment of outstanding amount on purchase price of Machinery is a revenue expenditure and as such it will not qualify for investment allowance and development rebate. In view of the decision of the Supreme Court in the case of Sivakami Mills Ltd. (Supra), the question referred to at the instance of the Revenue is answered in favour of the Revenue and against the assessee. (D.M.Dharmadhikari, CJ) (M.S.Shah, J) jitu "