TMI Blog2007 (2) TMI 103X X X X Extracts X X X X X X X X Extracts X X X X ..... g substantial questions of law. 1. Whether on the facts and in the circumstances of the case, the Income-tax Tribunal is right in law in allowing the expenditure on replacement of machinery as revenue expenditure and not capital? 2. Whether on the facts and in the circumstances of the case, the Income-tax Tribunal is right in law in holding that the scrap and waste materials generated during the course of manufacture, royalty received and the guarantee commission for the purpose of calculation of 80HHC deduction would have to be excluded from business profit for the purpose of calculation of deduction under 80HHC? 3. Whether on the facts and in the circumstances of the case, the Income-tax Tribunal is right in law in holding that ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te Tribunal, remitted the issue of replacement of machinery to the Assessing Officer to decide the issue on the basis of materials. So far as scrap and waste materials generated during the course of manufacture, royalty and guarantee commission are concerned, the Appellate Tribunal decided the issue in favour of the assessee. The Appellate Tribunal also decided the issue of inclusion of excise duty and sales tax to the total turnover in favour of the assessee. Aggrieved by the same, the Revenue has preferred this appeal raising the questions of law referred above. 6. As regards the 1st question, the issue whether the expenditure on replacement of machinery is capital or revenue is not determined by the treatment given in the books of acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 80HHC of the Act as the total turnover in section 80HHC is only the turnover relating to export business of the assessee and not the turnover relating to other business of the assessee. 11. Applying the ratio laid down by this Court in C.I.T. v. Madras Motors/M.M.Forgings Ltd. (257 ITR 60), we hold that the scrap and waste materials, which would not be relatable to export business of the assessee, have to be excluded from business profit for the purpose of calculation of deduction under section 80HHC of the Act. 12. On the question of includibility of royalty as well as the guarantee commission for the purpose of calculation of deduction under section 80HHC of the Act, the Bombay High Court in Commissioner of Income-tax (Appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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