9911796707
TMI Blog2006 (1) TMI 92X X X X Extracts X X X X X X X X Extracts X X X X ..... cer, by an order dated March 28, 1996, disallowed the claim of the assessee in respect of replacement of old machinery by a new one on the ground that the same cannot be treated as a revenue expenditure; recalculated the benefit under section 80HHC by including the excise duty and sales tax to the total turnover; disallowed the claim of the deduction pertaining to loss on revaluation of the tools which is in the nature of capital asset; and also treated the compensation received from the insurance as a revenue receipt. Aggrieved by the said order, the assessee filed appeals before the Commissioner of Income-tax (Appeals). The Commissioner of Income-tax (Appeals), by an order dated October 30, 1996, partly allowed and partly dismissed the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT v. Sirpur Paper Mills Ltd. [1978] 112 ITR 776. The first and the second questions, viz., whether the replacement of machinery is capital or revenue and the replacement of independent complete machinery can be treated as revenue expenditure can be dealt with together. The 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 Commissioner and the Appellate Tribunal, finding that replacement of machinery is a revenue expenditure, held that the claim of the assessee cannot be disallowed as the said replaced machinery d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnover while computing the deduction under section 80HHC. Hence, question No. 3 is answered against the Revenue. As far as the fourth question is concerned, the assessee received a sum of Rs. 17.79 lakhs as compensation from the Oriental Insurance Corporation in connection with the machinery damaged in a fire and claimed that it should be treated as a capital receipt. The Assessing Officer turned down the claim of the assessee and treated the same as a revenue receipt. On appeal, the Commissioner of Income Tax (Appeals), deleted the addition by following the Supreme Court decision in CIT v. Sirpur Paper Mills Ltd. [1978] 112 ITR 776, wherein the Supreme Court held that the balance amount of compensation left after incurring the expenditu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate Tribunal does not warrant any interference. It is seen that the question of law has not been happily framed and hence, we reframe the same as under: "Whether, on the facts and circumstances of the case, the Tribunal was right in holding that the insurance compensation received by the assessee is to be treated as a capital receipt?" Hence, answering the question in the affirmative and holding that the insurance compensation received by the assessee has to be treated as capital receipt, the fourth question as reframed is answered against the Revenue. In view of the above, we do not find any error in the order of the Tribunal and no question of law much less a substantial question of law arises for consideration of this court. Hence, t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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