Bombay H.C : Whether commitment charges paid by the assessee to the financial institutions are deductible as a revenue expenditure.

High Court Of Bombay

CIT vs. Associated Cement Companies Ltd.

Section 37(1)

S.H. Kapadia & A.P. Shah, JJ.

ITA No. 169 of 2000

21st February, 2000

Counsel Appeared

R.V. Desai with J.P. Deodhar, for the Appellant : U.C. Tripathi with Dinesh Vyas, for the Respondent

JUDGMENT

BY THE COURT :

The first point which arises in this appeal is whether commitment charges paid by the assessee to the financial institutions are deductible as a revenue expenditure. In the case of India Cements Ltd. vs. CIT (1966) 60 ITR 52 (SC), the Supreme Court has laid down that the act of borrowing was incidental to the carrying on of business, the loan obtained was not an asset or an advantage of enduring nature and, therefore, the expenditure made for securing the use of money for a certain period was a revenue expenditure and it was irrelevant to consider the object with which the loan was obtained. This judgment squarely applies to the facts of the present case. Further, as held by the Tribunal, the above point was decided by the appellate authority in favour of the assessee for the asst. yrs. 1983-84 to 1986-87. Under the circumstances, there is no merit on this point in the present appeal.

2. The second point raised in this appeal is whether gratuity paid in excess of the limits prescribed by the Gratuity Act constituted allowable deduction. In the case of CIT vs. Hindustan Motors Ltd. (1989) 77 CTR (Cal) 122 : (1989) 175 ITR 411 (Cal) : TC 18R.611, it was held that the additional gratuity paid to monthly wage earners could not be disallowed as it constituted an expenditure under the rules of the company. Applying the said judgment of the facts of the present case, the Tribunal has found that in the present matter, additional gratuity was paid to monthly wage earners (employees) and that even for the past assessment year, the Department has allowed deduction in respect of additional gratuity paid to such employees.

Under the above circumstances, the appeal stands dismissed as no substantial question of law arises.

[Citation : 249 ITR 3]

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