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2014 (8) TMI 460 - HC - Income TaxReplacement of machinery and introduction of compact spinning system - Whether the Tribunal was right in holding that the expenditure incurred by the assessee in replacing machineries and introducing 'compact spinning system' in the place of 'conventional drafting system' is revenue expenditure allowable u/s 37 – Held that:- Following the decision in M/s. Super Spinning Mills Ltd. Versus The Assistant Commissioner of Income-tax [2013 (9) TMI 88 - MADRAS HIGH COURT] - the basic test is to find out whether expenditure is incurred to "preserve and maintain" an already existing asset and the expenditure must not be to bring a new asset into existence or to obtain a new advantage - elaborating on the provisions of Section 31 of the Act and Section 37 of the Act, the Authority has to pass an order on the impact of replaced materials on the business as well as functioning of the machinery after replacement to result in the higher productivity or not – thus, the order of the Tribunal is set aside and the matter is remitted back to the AO for fresh consideration on replacement of machinery – Decided in favour of Revenue.
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