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TMI Blog2007 (3) TMI 197X X X X Extracts X X X X X X X X Extracts X X X X ..... in holding that excise duty and sales tax collection does not form part of the turnover, for the purpose of calculation of deduction under section 80 HHC? 2. Whether, in the facts and circumstances of the case, the Tribunal was right in holding that conversion charges does not form part of the turnover, for the purpose of calculation of deduction under section 80 HHC? 3. Whether, in the facts and circumstances of the case, the Tribunal was right in allowing a deduction of the amounts spent on replacement of machinery as revenue expenditure? 4. Whether, in the facts and circumstances of the case, replacement of independent complete machinery can be treated as revenue expenditure? 5. Whether, in the facts and circumstances of the case, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... favour of the assessee. Aggrieved by the same, the Revenue has preferred the appeals raising the common questions of law referred to above. 5. With regard to the first question, viz., whether the excise duty and sales tax do not form part of the turnover for the purpose of calculation of deduction under section 80HHC of the Act, this court in CIT v. Wheels India Ltd. [2005] 275 ITR 319 and CIT v. Sundaram Fasteners Ltd. [2005] 272 ITR 652, which were followed by this court in CIT v. India Pistons Ltd. [2006] 282 ITR 632, held that it is highly impossible to accept the contention that the term "turnover" would include the excise duty and sales tax components which are all indirect taxes and which the assessee has to collect and pay over to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uction under section 80 HHC of the Act. 8. As regards other questions, the issue whether the expenditure on replacement of machinery is capital or revenue is not determined by the treatment given in the books of account or in the balance-sheet. The claim has to be determined only by the provisions of the Act and not by the accounting practice of the assessee. 9. This court, in CIT v. Janakiram Mills Ltd. [2005] 275 ITR 403, held that all plant and machinery put together amount to a complete spinning mill which is capable of manufacturing yarn and hence, each replaced machine could not be considered as an independent one and no intermediate marketable product was produced. Applying the above ratio to the facts of the case, we hold that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rect Taxes by Circular No. 469, dated September 23, 1996, reported in [1986] 162 ITR (St.) 21, 24. In the instant case, no acquisition of any new asset, much less capital of any enduring advantage resulted to the assessee-respondent. The assessees replaced the worn out part of machines without discontinuing their production activities. No claim for depreciation was ever made before any authorities either by the assessees or by the Revenue to consider the question as block of assets nor was there any necessity to do so. The Department did not raise any objection before the Tribunal regarding the claim of allowance on the premise of the block of assets concept. It is, therefore, stated that such question does not arise out of the order of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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