COMMISSIONER OF INCOME TAX Vs. LOYAL SUPER FABRICS

JUDGEMENT

(1.) THE substantial question of law that arises for consideration in the present appeal is, whether the Tribunal was right in holding that the expenditure incurred for shifting of the factory from Kovilpatti to Cuddalore is a revenue expenditure or capital expenditure under the following facts and circumstances of the case.

(2.) 1 The respondent/assessee company is engaged in the business of dyeing and processing of cloth and it filed its return of income for the asst. yr. 1992 -93 declaring 'nil' income. In the said return, the assessee claimed a sum of Rs. 6,80,908, being the expenses incurred for shifting the factory from Kovilpatti to Cuddalore, as revenue expenditure. But, the AO, by an assessment order dt. 29th Feb., 2000, disallowed the claim of the assessee and treated the same as capital expenditure by relying upon the decision of the apex Court in Sitalpur Sugar Works Ltd. v. CIT : [1963]49ITR160(SC) and a decision of this Court in CIT v. Bimetal Bearings Ltd. : [1994]210ITR945(Mad) against which an appeal was preferred by the assessee before the CIT(A), who also confirmed the order of the AO by an order dt. 1st June, 2004. But, on further appeal by the assessee before the Tribunal, taking note of the facts and circumstances of the case and the reason for shifting the factory from Kovilpatti to Cuddalore, the Tribunal held that the expenditure incurred for shifting the factory is a revenue expenditure and accordingly, held the issue in favour of the assessee. Hence, the present appeal by the Revenue.

(3.) WE have considered the submissions made by the learned counsel appearing for the appellant.