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TMI Blog2013 (4) TMI 973X X X X Extracts X X X X X X X X Extracts X X X X ..... ? The assessee has claimed the expenditure during the aforesaid three assessment years as revenue expenditure under the head replacement of machinery . On the other hand, the Revenue has assessed the expenditure as capital expenditure. 2. The assessee is before the Tribunal in its second innings. In the first round of litigation, the matter travelled upto the Hon ble Supreme Court of India. In the first round, the CIT(A) and the Tribunal held the expenditure incurred by the assessee on replacement of machinery as capital expenditure. The Hon ble Jurisdictional High Court in the appeal of the assessee following the judgement in the case of CIT Vs. Janakiram Mills Ltd. reported as 275 ITR 403 (Mad.) held that the expenditure incurred on r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... On the other hand, the ld. D.R. appearing on behalf of the Revenue submitted that expenditure incurred by the assessee on replacement of machinery is capital expenditure. The ld. D.R. strongly supported the order of the CIT(A). 5. We have heard the submissions of both the parties and have perused the orders of the authorities below as well as judgements / orders cited by the representatives of both the parties. To decide whether expenditure incurred by the assessee is capital or revenue in nature, the following basic points should be kept in mind. i) Capital expenditure is incurred in acquiring, extending or improving a fixed asset, whereas revenue expenditure is incurred in the normal course of business as a routine business expe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee has increased to a large extent. The Assessing Officer following the decision of the Hon ble Supreme Court in the case of Ballimal Nawal Kishore Vs. CIT reported as 224 ITR 414 held that the expenditure is not allowable as revenue expenditure as it is capital in nature. Similarly, for the Assessment Years 1996- 97 1997-98, the Assessing Officer after giving the details of the machinery replaced, has come to a conclusion that the expenditure incurred on replacement of machinery is capital in nature. The Hon ble Supreme Court of India in the case of CIT Vs. M/s. Mangayarkarasi Mills P. Ltd.(supra) has relied on its earlier decision in the case of Ballimal Nawal Kishore Vs. CIT (supra) to hold that replacement of old machine par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on and addition to the block of assets, which is a part of replacement. It is also submitted that while under the law, as it stood prior to 1988-89, the fact of treating the entire mill as an integrated unit may have had the effect of treating the replacement of machinery as replacement of parts of a larger whole and thus treated as revenue expenditure and once the concept of block of assets has been brought in by the Parliament from the assessment year 1988-89,whether the mill is an integrated whole or not,whether the replacement of machines resulted in increased capacity or not, will have no bearing and when any item belonging to the block is removed, its value is reduced and if any new item comes in its place, its value is added to the b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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