2006 (6) TMI 93

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....ya, the chairman/director of the company, was not covered by the provisions of section 40(c) of the Income-tax Act, 1961 as it then existed? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in deleting the disallowance of the amounts of depreciation, insurance premium, rent on furniture relating to the residential accommodation 'Niladri' on the ground that inasmuch as the expenses were not allowable specifically under section 37(1) of the Income-tax Act, the provisions of section 37(4) would not apply thereto? 3. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that expenses relating to the building 'Niladri' at Bombay were allowable as expenses i....

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.... respondent-assessee contended that the guarantee commission is not to be subject to any disallowance under section 40(c) of the Act. The same was not accepted both by the Assessing Officer as well as by the appellate authority. The Tribunal has accepted the same in the light of the judgment of the Calcutta High Court in India Jute Co. Ltd. v. CIT [1989] 178 ITR 649. According to the Tribunal, the said payment of commission would not fall within section 40(c) of the Act. Heard learned counsel for the parties and perused the material placed on record. At this stage, we have to notice that in somewhat similar circumstances, a Division Bench of this court in ITRC No. 136/1994, dated March 25, 1996 has chosen to consider this very issue a....

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....e same could be treated as an admissible deduction. The issue before us is whether the chairman and director is expected to incur such expenditure and on offering of such personal guarantee if any commission is paid, whether such amount could be treated as remuneration paid for such activity. When it cannot be treated as a remuneration paid to the chairman and director, we do not think it would be appropriate to hold that the same should be subjected to limitations of the provision of section 40(c) of the Income-tax Act. Therefore, we answer the question referred for our opinion against the Department and in the affirmative." The said judgment is equally applicable to the facts of this case. In the light of the answer in identical circum....