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TMI Blog2002 (11) TMI 46X X X X Extracts X X X X X X X X Extracts X X X X ..... acement of a manually operated crane by an electrically operated crane, is a capital expenditure or not. The Assessing Officer took the view that the expenditure is capital in nature. According to him, the assessee had introduced a new independent self-contained machinery. He took the view that the E.O.T. crane acquired is an addition to plant and machinery and further that the assessee had claimed depreciation on M.O.T. crane also which would show that the said crane was also used. The first appellate authority in appeal took the view that this is actually a replacement of the old machinery for over all improvement and efficiency of the company and allowed the claim as a revenue expenditure. In appeal by the department the Tribunal took th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the orders of the three authorities. The assessing authority in paragraph 4 of the assessment order considered the question thus: "The assessee has debited an amount of Rs. 6,42,000 being the cost of E.O.T. crane. In the audit report it has been rightly pointed out that the payment is capital in nature. The assessee has debited this amount in the profit and loss account on the contention that the E.O.T. crane is replacement in place of the old M.O.T. crane. The E.O.T. crane by itself is a machinery and it can be operated by electric power and the old one manually. In view of these facts I hold that the E.O.T. crane acquired is an addition to plant and machinery and not replacement as contended. It may be seen from the depreciation state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... without the machinery newly introduced by the assessee." The Tribunal accordingly set aside the order of the first appellate authority. We notice that in the case of the assessee itself a question came up before this court on similar circumstances in CIT v. Co-operative Sugars Ltd. [1999] 235 ITR 343. The question was as to whether the expenses incurred for the replacement of items high velocity juice heater, sugar grader, centrifugal machinery, juice sulphiter, vacuum filter drum, pumps and meters are of capital nature. In that case the assessing authority has taken the view that the sugar plant of the assessee consisted of several independent components such as the items already mentioned, that each unit is a separate entity by itself ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l, a profit earning apparatus. This court considered the question as to how to approach to solve the ticklish question as to what is the distinction between capital and revenue expenditure. Considering the principles laid down in the decision of the Privy Council in B.P. Australia Ltd. v. Commission of Taxation of the Commonwealth of Australia [1966] AC 224 and the decision of the Supreme Court in Alembic Chemical Works Co. Ltd. v. CIT [1989] 177 ITR 377 this court observed as follows: "From the above reproduced observations, it is nothing but clear that the answer to the question whether a given expenditure is capital in nature or revenue in nature, will depend on the facts and circumstances of each case. Both the Assessing Officer and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is whether the sugar mill can work in the absence of machinery, expenditure incurred on which is claimed by the assessee. This question has to be answered in the negative. For the manufacture of sugar, all the machinery claimed are necessary. No doubt, the expenditure was incurred on the principal components of the sugar mill, still, however, it would be wrong to hold each machinery as an independent unit. All machinery put together complete the sugar plant. We, therefore, entirely agree with the view taken by the Appellate Tribunal." Yet another contention taken by senior standing counsel for the Revenue that the expenditure incurred on substantial replacement is capital in nature the Division Bench further observed: "But, in the case i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the factual situation obtained, namely, whether the electrically operated crane was installed as part of the plant consisting of various machineries for bringing out the end-product, namely, sugar. Each of the authorities without ascertaining the factual position, if necessary, by conducting a spot inspection had straightaway gone into various circumstances including the decisions of courts and taken his or its own view on the facts. This approach really is unfortunate. In every case, the authorities must make sure of the factual position with regard to the issues involved and then apply the law. In this case what happened was that all the authorities including the Tribunal have assumed certain facts which had no foundation and decided th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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