SLM Maneklal Industries vs Commissioner of Income Tax

G.T. Nanavati, J.—The Tribunal has referred the following two question to this Court under s. 256(1) of the IT Act, 1961 :

"(1) Whether, on the facts and in the circumstances of the case, bank guarantee commission on Rs. 27,963 is capital or allowable revenue expenditure ?

(2) Whether, on the facts and in the circumstances of the case, the assessee is entitled in law to the deduction of the surtax liability of Rs. 21,163 in the computation of its business income as allowable business expenditure ?"

Following the decision in CIT vs. Vallabh Glass Works Ltd. (1982) 137 ITR 389 we answer the question by stating that bank guarantee commission is capital expenditure. Therefore, question No. 1 is answered against the assessee and in favour of the Revenue. Question No. 2 is answered in the negative, that is in favour of the assessee (sic) and against the Revenue (sic) following the decision in S.L.M. Maneklal Industries Ltd. Vs. Commissioner of Income Tax, .

The reference is disposed of accordingly with no order as to costs.