COMMISSIONER OF INCOME TAX Vs. VIJAYESWARI TEXTILES LTD

JUDGEMENT

(1.) THE Tribunal has stated a case and referred the following question of law for our consideration:

(2.) THE assessment year involved is 1986-87. The assessee spent a sum of Rs. 45,99,178 for purchasing four items of machinery which are set out in the order of the Tribunal and claimed the same as revenue expenditure. The AO, however, held it to be a capital expenditure and disallowed the same. The AAC reversed the order of the AO and held that it was a revenue expenditure which was confirmed by the Tribunal.

(3.) IT is made clear that though the Tribunal has found that it is a case of purchase of new items of machinery to replace the old ones, the Tribunal has to consider the question whether the expenditure incurred in the purchase of machinery is revenue or capital in nature. Learned counsel for the assessee submitted that the entire production unit has to be taken as a single industrial unit and what was replaced is a part of the machinery in the single unit and therefore, the expenditure incurred is a revenue expenditure. However, learned junior standing counsel for the Revenue submitted that each item of machinery has to be viewed separately and the new items of machinery purchased would constitute a capital expenditure. We have, in our judgment of even date in TC No. 55 of 1998, already referred to some of decisions relied upon by the parties and remitted the matter to the Tribunal. Following the said judgment, we remit the tax case reference also to the Tribunal to consider afresh the issues that arise in the tax case reference in accordance with law.