CIT Vs. SOUTHERN ROADWAYS LTD

JUDGEMENT

(1.) The judgment of the court was delivered by

(2.) The revenue is the appellant. The assessing officer disallowed the claim of replacement expenditure of Vibrator 0.5 HP Motor and cost of repairing driver cabins and oil tanker holding that replacement of old by new machinery cannot be treated as revenue expenditure. The assessing officer also disallowed the claim of the assessee towards purchase of software treating the same as capital expenditure. The Commissioner (Appeals), however, decided the issues in favour of the assessee. The Tribunal, on appeal by the revenue, held the issues in favour of the assessee. Hence, this appeal by the revenue raising the following questions of law:

(3.) With regard to the first question, the question whether the expenditure on replacement of machinery is capital or revenue is not determined by the treatment given in the books of account or in the balance-sheet. The claim has to be determined only by the provisions of the Act and not by the accounting practice of the assessee. In the instant case, the Commissioner, and the Appellate Tribunal, finding that replacement of machinery is revenue expenditure, held that the claim of the assessee cannot be disallowed.