SETHURAMAN J.


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 Act, 1961, for the assessment year 1970-71 ? "


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


(1) For accepting usance bills under Industrial Development Bank of India Scheme (IDBI) for purchase of four numbers of Doubling Frames ... 6, 078.74


(2) For accepting usance bills under Industrial Development Bank of India Scheme (IDBI) for purchase of drafting conversion materials for Ring Frames ... 6, 679.72


(3) For giving guarantee to the Commercial Taxes Department for getting stay of disputed sales tax 1, 245.00 Total ... 14, 003.46


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


As far as the first two amounts are concerned, the matter has already been decided in Sivakami Mills Ltd. v. CIT. 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 dischargi

ng a revenue liability would clearly be revenue 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.