TMI Blog2006 (2) TMI 100X X X X Extracts X X X X X X X X Extracts X X X X ..... ge 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 - - - - - Dated:- 8-2-2006 - Judge(s) : P. D. DINAKARAN., P. P. S. JANARTHANA RAJA. JUDGMENT The judgment of the court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal was right in law in holding that the expenditure incurred by the assessee during the accounting year on the replacement of machinery was deductible as current repairs/revenue expenditure? 2. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that addition made on account of Modvat credit relating to the machinery is a revenue expenditure? 3. Whether, on the facts and circumstances of the case, the Tribunal was right in holding that sales tax and excise duty does not form part of the turnover, for the purpose of calculation of deduction under section 80HHC? 4. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ught in. This court, in the decision first cited supra in CIT v. Janakiram Mills Ltd. [2005] 275 ITR 403, held that all plant and machinery put together amount to a complete spinning mill which is capable of manufacturing yarn and hence, each replaced machine could not be considered as an independent one and no intermediate marketable product was produced. Hence, the first question in T.C. Nos. 58 and 59 of 2006 is answered against the Revenue. With respect to the second question in T.C. Nos. 58 and 59 of 2006, viz., the addition made on account of Modvat credit relating to the machinery is a revenue expenditure, admittedly, the Modvat credit relates to replacement of machinery. Since the cost of replacement was allowed as revenue exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f profit of business and therefore, the sales tax and excise duty are not to be included in the total turnover while computing the deduction under section 80HHC. Hence, question No. 3 in T.C. Nos. 58 and 59 of 2006 is answered against the Revenue. As far as the fourth question in T.C. Nos. 58 and 59 of 2006 and the only question in T.C. Nos. 96 and 97 of 2006, viz., the excess remuneration paid to the directors is allowable as a deduction is concerned, the Assessing Officer disallowed a sum of Rs. 16,29,000 being the excessive remuneration paid to the directors. The details of the payment of remuneration to the directors are as under: Shri L.S. Manivannan Rs.6,08,250 Shri L.S. Prabhakaran Rs.6,08,250 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he said order, the Revenue filed appeals to the Income-tax Appellate Tribunal, which, considering the factual situation, allowed the claim of the assessee and dismissed the Revenue's appeal. 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. That apart, learned standing counsel appearing for the Revenue, did not place any material to show that the remuneration was excessive. When there is a factual finding that the remuneration paid by the assessee to its directors is reasonable, we find no error or infirmity in the order of the Appellate Tribunal. Henc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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