TMI Blog2007 (3) TMI 197X X X X Extracts X X X X X X X X Extracts X X X X ..... udgment of the court was delivered by P. D. DINAKARAN J.—1. The above tax case appeals are directed against the order of the Income-tax Appellate Tribunal dated January 27, 2006, in I.T. A. Nos. 737-739/Mds/2001 and 251, 282/Mds/2002, 2070-2072/Mds/2001 and C. O. No. 30/Mds/2002 in I. T. A. No. 282/Mds/2002, raising the following substantial questions of law: "1. Whether, in the facts and circumstances of the case, the Tribunal was right in holding that excise duty and sales tax collection does not form part of the turnover, for the purpose of calculation of deduction under section 80 HHC? 2. Whether, in the facts and circumstances of the case, the Tribunal was right in holding that conversion charges does not form part of the turn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Income-tax (Appeals) also held the expenditure on replacement of machinery as revenue expenditure. 4. On appeal at the instance of the Revenue, the Income-tax Appellate Tribunal held that the cost towards replacement of part of the machinery would be revenue expenditure. The Appellate Tribunal also decided the issue of inclusion of excise duty as well as sales tax and conversion charges for the purpose of deduction under section 80 HHC of the Act in favour of the assessee. Aggrieved by the same, the Revenue has preferred the appeals raising the common questions of law referred to above. 5. With regard to the first question, viz., whether the excise duty and sales tax do not form part of the turnover for the purpose of calculation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich do not have an element of turnover like rent, commission , interest, etc. This court in CIT v. Sundaram Clayton Ltd . [2006] 281 ITR 425 also held that the charges of miscellaneous income and commission do not form part of the turnover for the purpose of calculation of deduction under section 80HHC of the Act. Applying the above ratio to the facts of the case, we are of the view that the conversion charge has to be excluded from the business profit for the purpose of calculation of deduction under section 80 HHC of the Act. 8. As regards other questions, the issue 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oduced with a view to streamline the excess depreciation allowed and to allow terminal depreciation when the block of assets concept was introduced, the provisions relating to terminal depreciation and the profit result from the sale of assets, which were originally considered under sections 32(1) (iii) and 41(2), were suitably amended to fall in line with the proposed simplification of the concept of block of assets. The circular describing the concept of block of assets is explained by the Central Board of Direct Taxes by Circular No. 469, dated September 23, 1996, reported in [1986] 162 ITR (St.) 21, 24. In the instant case, no acquisition of any new asset, much less capital of any enduring advantage resulted to the assessee-respondent. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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