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TMI Blog2007 (4) TMI 199X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant. JUDGMENT The judgment of the court was delivered by P. D. DINAKARAN J.—1. The above tax case appeals are directed against the order of the Income-tax Appellate Tribunal dated March 17, 2006, made in I. T. A. Nos. 1121/Mds/2002, 415/Mds/2000 and 1167/Mds/2001 for the assessment years 1997-98, 1995-96 and 1996-97, respectively, raising the following substantial questions of law "1. Whether, on 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? 2. Whether, on the facts and circumstances of the case, replacement of independent complete machinery can be treated as revenue expenditure? 3. Whether, on the facts an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of machinery and CIT v. Wheels India Ltd. [2005] 275 ITR 319 (Mad) and CIT v. Sundaram Fasteners Ltd. [2005] 272 ITR 652 (Mad), which were followed in CIT v. India Pistons Ltd. [2006] 282 ITR 632 (Mad), with regard to the exclusion of excise duty and sales tax collection from the total turnover for the purpose of calculating deduction under section 80HHC. 5. With regard to the first three 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. In the instant case, the Appellate Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was introduced with a view to streamline the excess depreciation allowed and to allow terminal depreciation. When the block of assets concept was introduced, the provisions relating to terminal depreciation and the profit resulting from the sale of assets, which were originally considered under sections 32(1) (iii) and 41(2), were suitably amended to fall in line with the proposed simplification of the concept of block of assets. The circular describing the concept of block of assets is explained by the Central Board of Direct Taxes by Circular No. 469, dated September 23, 1986, 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 assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls India Ltd. [2005] 275 ITR 319 and CIT v. Sundaram Fasteners Ltd. [2005] 272 ITR 652 (Mad), which were followed in CIT v. India Pistons Ltd. [2006] 282 ITR 632 (Mad) 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 the Government and such statutory dues will not have any element of profit of business and, therefore, the sales tax and excise duty are not to be included in the total turnover while computing the deduction under section 80 HHC. 11. Therefore, finding no substantial questions of law that arise for our consideration in these appeals, the same a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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