Commercial expediency allows deduction of corporate guarantee discharge expense linked to business and subsidiary support.

Expenditure incurred to discharge a corporate guarantee given for a subsidiary was treated as a deductible business outlay where it was connected with the assessee's business objects and satisfied the test of commercial expediency. The analysis notes that such expenditure may be allowable if it is incidental to the business, and that the absence of a direct income link is not decisive. Relying on the assessee's earlier year ruling, the Tribunal followed the consistent view that the guarantee obligation arose in the course of business and allowed the claim, rejecting the Revenue's challenge.

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Issues: Whether the amount paid towards discharge of corporate guarantee given on behalf of a subsidiary company was allowable as a business deduction.

Analysis: The claim was examined in the light of the assessee's business objects, the business connection with the subsidiary, and the principle that expenditure incurred for commercial expediency is allowable if it is incidental to the business. The earlier decision in the assessee's own case had held that the guarantee obligation was incurred in the course of business, and that the fact that the expenditure did not directly produce income was not decisive. Following that consistent view, the Tribunal found no reason to differ from the earlier order allowing the claim.

Conclusion: The expenditure on discharge of corporate guarantee was allowable, and the Revenue's challenge failed.

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