2003 (3) TMI 35 - HC - Income Tax

Expenditure on purchase of drawn frame - Whether on the facts and in the circumstances of the case the Appellate Tribunal is right in law in holding that the expenditure on purchase of drawn frame is revenue expenditure? - replacement has neither changed the installed capacity of the assessee nor brought into existence any new assets of enduring nature. The replacement of draw frame has not also brought any substantial improvement on the installed capacity of the textile unit Held that cost of replacement of draw frame should only be treated as revenue expenditure

Summary

The High Court of Madras ruled that the cost of replacing draw frames is considered as revenue expenditure for a closely held company engaged in manufacturing and selling yarn. The replacement did not increase capacity or create new assets, so it was allowed as revenue expenditure. The decision was in favor of the assessee for the assessment year 1987-88.