2002 (10) TMI 15 - HC - Income Tax

1. Whether, Tribunal is right in law in holding that the expenditure incurred by the assessee during the accounting year on replacement of machinery at Rs. 63,80,131 was amount paid on current repairs and was allowable under section 31? - 2. Whether Tribunal is correct in law in deducting the expenditure incurred on purchase of ring frames while computing the book profits under section 115J? - The first question referred needs to be reframed deleting the reference therein to current repairs and substituting section 37 in place of section 31 - The question reframed is answered in favour of the assessee. The second question is also answered in favour of the assessee, as it is only consequential to the first.

Summary

The High Court of Madras ruled in favor of the assessee regarding the expenditure on replacement of machinery and purchase of ring frames for the assessment year 1990-91. The Tribunal considered the expenditure as revenue in nature, not capital expenditure. The replacement of ring frames was necessary for efficient functioning, similar to replacing parts in a motor engine. The Tribunal's decision was based on the nature and utility of the ring frames. The questions referred by the Revenue were answered in favor of the assessee.