COMMISSIONER OF INCOME TAX Vs. SAGAR TALKIES

JUDGEMENT

(1.) THIS appeal is by the revenue challenging the findings of the Income Tax Appellate Tribunal, Bangalore Bench a in ITA No. 695/bang/2000 for the assessment year 1996-97 wherein the Tribunal has reversed the findings of the Assessing Officer and also the order passed by the Commissioner of Income Tax (Appeals) raising the following substantial question of law: i) Whether the Tribunal was correct in holding that the amount of Rs. 8,06,147/- incurred by the assessee for replacing the old mono-sound system with a new stero system viz. , Dolby system should be treated as a revenue expenditure and not as a capital expenditure as held by the assessing Officer and confirmed by the Appellate Commissioner?

(2.) THE assessee during the relevant assessment year replaced the old mono sound system with new Dolby stereo system and treated it as revenue expenditure, the assessing Officer rejecting the contention of the assessee on the ground that it cannot be treated as revenue expenditure, held it as a capital expenditure. Accordingly, he passed an order of assessment. Aggrieved by the order of assessment the assessee filed and appeal before the Commissioner of Income Tax (Appeals), which came to be dismissed against which a further appeal was filed before the Income Tax Appellate Tribunal. The Tribunal after considering the fact that the assessee instead of repairing the sound system had installed Dolby system held that such change of stereo would amount to revenue expenditure an not a capital expenditure. Accordingly, the appeal was allowed. Aggrieved by the same, the revenue is before us.

(3.) WE have heard the learned counsel appearing for both the parties.