2006 (12) TMI 135

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..... - - Dated:- 1-12-2006 - ADARSH KUMAR GOEL and RAJESH BINDAL JJ. S. K. Garg Narwana for the Commissioner. Rohit Sud for the assessee. JUDGMENT 1. The following question of law has been referred for the opinion of this court by the Income-tax Appellate Tribunal, Chandigarh Bench, Chandigarh (for short, "the Tribunal"), arising out of its order dated June 28, 1994, in I.T.A. No. 1058/Chandi/87, for the assessment year 1979-80 : "Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in allowing expenditure of Rs. 73,180 shown by the assessee in the machinery repairs account as revenue expenditure though this related to the cost of motors and other items resulting in an enduring benefit t .....

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..... e for the initiation of a business, for extension of a business, or for a substantial replacement of equipment : vide Lord Sands in Commissioners of Inland Revenue v. Granite City Steamship Company Ltd. [1927] 13 TC 1 (CS), at page 14. In City of London Contract Corporation Ltd. v. Styles (Surveyor of Taxes) [1887] 2 TC 239 (CA) at page 243, Bowen L. J. observed as to the capital expenditure as follows : 'You do not use it "for the purpose of" your concern, which means, for the purpose of carrying on your concern, but you use it to acquire the concern.' 2. Expenditure may be treated as properly attributable to capital when it is made not only once and for all, but with a view to bringing into existence an asset or an advantage for the .....

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..... being turned over yields profit or loss. Fixed capital, on the other hand, is not involved directly in that process and remains unaffected by it." 5. The above test still holds the field and the question arises from case to case for application of the above test. Replacement of small machinery is generally treated as revenue expenditure as no new asset was brought into existence. Reference may be made to the judgment of the Andhra Pradesh High Court in Nathmal Bankatlal Parikh and Co. v. CIT [1980] 122 ITR 168 (AP) [FB]. The same view was taken in CIT v. Kusum Products Ltd. [1989] 175 ITR 557 (Cal), ITAT v. B. Hill and Co. P. Ltd. [1983] 142 ITR 185 (All), CIT v. Jafarbhai Akbarali and Bros. [1995] 211 ITR 496 (Bom) and CIT v. Hindust .....

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