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2006 (2) TMI 100 - HC - Income TaxAssessing Officer, disallowed the claim of the assessee in respect of replacement of old machinery by new one on the ground that the same cannot be treated as a revenue expenditure; treated the Modvat credit relating to the replacement of machinery as capital; recalculated the benefit under section 80HHC by including the excise duty and sales tax to the total turnover and also disallowed the excess remuneration paid to the director - held that the claim of the assessee cannot be disallowed as the said replaced machinery did not bring about any asset or any distinct advantage to the assessee and no structural change was also brought in - admittedly, the Modvat credit relates to replacement of machinery. Since the cost of replacement was allowed as revenue expenditure, addition made on account of Modvat credit relating to the machinery is a revenue expenditure – held that sales tax and excise duty are not to be included in the total turnover while computing the deduction under section 80HHC - It could be seen that both the authorities below had concurrently given finding that these directors have rendered services. Hence, disallowance made by the Assessing Officer towards the remuneration payable to the directors is not fair
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