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Issues Involved:
The issue involves determining whether the expenditure incurred on replacement of moulds is a revenue expenditure or a capital expenditure for the assessment year 1982-83. Judgment Details: The Revenue filed an application u/s 256(2) of the Income-tax Act, 1961 seeking a direction to the Income-tax Appellate Tribunal to refer a question regarding the treatment of expenditure on replacement of moulds. The assessee had spent a sum on purchasing moulds for manufacturing glass, which was treated as capital expenditure by the Assessing Officer. The Tribunal, following a precedent, allowed the expenditure as revenue expenditure as it did not enhance the capacity of the existing machines and was considered a replacement for damaged moulds. The High Court noted that whether replacement of certain items is revenue or capital expenditure is a question of fact based on the business context. The enduring benefit of the expenditure is not conclusive for categorization. Initial investment in machines is capital expenditure, but replacement of parts during operation is revenue expenditure. The Tribunal's decision was based on the specific facts of the case and the principle of law from a previous case. The Court found no challenge to the Tribunal's finding that the expenditure was for the replacement of moulds, not for enhancing machine capacity. As this finding was unchallenged, the Court upheld the Tribunal's decision not to refer the question proposed by the Revenue. The petition was dismissed for lack of merit. This judgment clarifies the distinction between capital and revenue expenditure based on the nature of the expenditure and its impact on the existing machinery, emphasizing the importance of factual analysis in such determinations.
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