1. The following question has been referred by the Tribunal under s, 256(1) of the I. T. Act, 1961 :
'Whether, on the facts and in the circumstances of the case, it has been rightly held by the Tribunal that the guarantee commission paid of Rs. 14,003 in acquiring certain machinery in the assessee's case and for stay of tax is an admissible deduction under section 37 of the Income-tax At, 1961, for the assessment year 1970-7 ?'
2. The question, in so far as it refers to 'for stay of tax', is not happily worded. A sum of Rs. 14,003 was paid as guarantee commission to the Bank of Madura. The break-up of the amount for the several items are as follows :
Rs.(1) For accepting usance bills underIndustries Development Bank of India Scheme(IDBI) for purchase for four numbers ofDoubling Frames ...... 6,078.74(2) For accepting usance bills under IndustrialDevelopment Bank of India Scheme (IDBI) forpurchase of drafting conversion materials forRing Frames ....... 6,679.72(3) For giving guarantee to the Commercial TaxesDepartment for getting stay of disputed salestax 1,245.00-----------Total ...14,003.46
3. It may be seen that the first two amounts represent the commission paid for importing machinery and the third item is for the purpose of complying with a condition in the order granting stay of collection of tax pending disposal of the appeal or other proceedings on sales tax.
4. As far as the first two amounts are concerned, the matter has already been decided in Sivakami Mills Ltd. v. CIT : 120ITR211(Mad) . As far as the third amount is concerned, it would stand on an a fortiori footing, because sales tax is a revenue liability and the guarantee commission paid for discharging a revenue liability would clearly be revenue.
5. The result is that the question referred is answered in the affirmative and in favour of the assessee. There will be no order as to costs.