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Issues involved: Determination of nature of receipt - Revenue or capital expenditure.
Summary: The appeal by the department was against the order of Ld. C.I.T.(A)-I, Kolkata dated 20/06/2011 for the assessment year 2007-08. The assessee, under the Ministry of Shipping, Govt. of India, is engaged in ship building, ship repairing, and general engineering. The ld. A.O. added &8377; 2 crores, received from the Government for plant & machinery upkeep, as revenue expenditure. The ld. C.I.T.(A) found that the receipt was actually in the form of equity capital and not revenue. The assessee provided a utilization certificate to support this claim. The ld. C.I.T.(A) accepted the claim of the assessee. The departmental representative relied on the order of ld. A.O., while the counsel for the assessee supported the order of ld. C.I.T.(A) and presented a letter from the Govt. of India confirming the nature of the receipt as equity capital. The Tribunal agreed with the findings of the ld. C.I.T.(A) and dismissed the revenue's appeal, stating that the receipt was a capital receipt based on the provided evidence. In conclusion, the Tribunal upheld the decision of the ld. C.I.T.(A) that the receipt of &8377; 2 crores from the Government was a capital receipt and not revenue, based on the nature of the receipt as equity capital for plant and machinery renewal and replacement. The Tribunal found no reason to interfere with the ld. C.I.T.(A)'s decision and dismissed the revenue's appeal.
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