2008 (2) TMI 11

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....led by the Department against decision dated 25.4.01 in Tax Appeal Nos.39 and 40 of 2001 delivered by Gujarat High Court. 2. Two questions of law arise for determination in these civil appeals which are as follow: "(1) Whether "commitment charges" can be allowed as deduction under Section 36(1)(iii) of the  Income-tax Act, 1961?" (2) Whether "charges" paid to COFACE is similar to pay....

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....ffect is the judgment of this Court in the case Commr. of Income-tax v. Sivakami Mills Ltd. - (1997) 227 ITR 465.  For the aforestated reasons, we answer question No.(1) in favour of the assessee and against the Department.  We may clarify that both the above judgments allows deductions under Section 37 of the 1961 Act and not under Section 36(1)(iii) of the 1961 Act.  In this case,....

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....t commence production during the assessment year under consideration, the expenses incurred were capital in nature.  The Department also placed reliance in this connection on Explanation 8 to Section 43(1) of the Income-tax Act, 1961.  On facts and circumstances of this case, once the Department equated the charges payable to COFACE with interest, our judgment in the case of Dy.  Co....