1989 (1) TMI 14

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....J. -By these five applications under section 256 (2) of the Income-tax Act, 1961, the Commissioner of Income-tax prays that the Tribunal be directed to draw up a statement of case and refer the following common question of law (though the amounts differ for each year and the question is also slightly differently worded) for the opinion of this court: "Whether, on the facts and in the circumstan....

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....s. 2,60,416 was paid to two directors. Mrs. R. B. Patel was paid a sum of Rs. 2,27,406 and Mr. P. B. Kotak was paid a sum of Rs. 33,010. The amount was paid for giving personal guarantees to various banks such as the Central Bank, Canara Bank, Dena Bank, Syndicate Bank and Bank of Tokyo. The Incometax, Officer disallowed the amount paid as guarantee commission and the disallowance was affirmed by ....

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....dia dated July 29, 1970, and came to the conclusion that despite the circular the assessee had no choice but to give personal guarantees of the directors as the banks concerned insisted on them. The Tribunal noticed that long after the circular, that is, even as late as August 27, 1975, the Canara Bank insisted on Personal guarantees. Further, the Dena Bank, by its letter of August 22, 1972, had r....

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....ndents contends that the circular dated July 29, 1970, of the Reserve Bank of India made it clear that personal guarantees were not normally to be taken and, consequently, the guarantee commission paid to the directors was not a legitimate business expenditure. He also submits that the position for the assessment years prior to 1970 is different from the position for the subsequent years in view o....