COMMISSIONER OF INCOME TAX Vs. LS MILLS LTD

JUDGEMENT

(1.) HEARD. The above appeals are preferred under Section 260-A of the income Tax Act 1961 against the orders of the Income Tax Appellate Tribunal madras Bench "c" dated 23. 6. 2005 and 26. 4. 2005 in I. T. A. Nos. 4 33, 434, 190, 220,/mds/2001.

(2.) THE facts in brief are : The assessee company is a private limited company engaged in the manufacture and sale of yarn. For the assessment years 1993-94, 1995-96, 1996-97 and 1995-96, the assessing officer, disallowed the claim of the assessee in respect of replacement of old machinery by new one on the ground that the same cannot be treated as a revenue expenditure; treated the MODVAT credit relating to the replacement of machinery as capital; recalculated the benefit under Section 80 HHC by including the excise duty and sales tax to the total turnover and also disallowed the excess remuneration paid to the director. Aggrieved by the said order, the assessee filed appeals before the CIT (Appeals ). The commissioner of Income Tax (appeals), allowed the above issues in favour of the assessee. Aggrieved by the same, the Revenue filed appeals before the Income tax Appellate Tribunal. The Appellate Tribunal dismissed the appeals filed by the Revenue.

(3.) AGGRIEVED by the said order of the appellate Tribunal, the Revenue has filed T. C. Nos. 58 and 59 of 2006 by raising the following substantial questions of law:- (1 ). Whether in the facts and circumstances of the case, the Tribunal was right in law in holding that the expenditure incurred by the assessee during the accounting year on the replacement of machinery was deductible as current repairs/revenue expenditure? (2 ). Whether on the facts and in the circumstances of the cae, the appellate tribunal was right in law in holding that addition made on account of MODVAT credit relating to the machinery is a revenue expenditure. (3 ). Whether in the facts and circumstances of the case, the Tribunal was right in holding that sales tax and excise duty does not form part of the turnover, for the purpose of calculation of deduction u/s. 80 HHC? (4 ). Whether on the facts and in the circumstances of the case, the Appellate tribunal was right in law in holding that the excess remuneration paid to the directors is allowable as a deduction? and filed T. C. Nos. 96 and 97 by raising the following substantial question of law: "whether on the facts and in the circumstances of the case, the Appellate tribunal was right in law in holding that the excess remuneration paid to the directors is allowable as a deduction?"