TMI Blog2007 (1) TMI 154X X X X Extracts X X X X X X X X Extracts X X X X ..... ue expenditure and treated the same as capital expenditure. The Assessing Officer also included excise duty and sales tax collections to the total turnover while computing deduction under section 80HHC. Aggrieved by the said order, the assessee went on appeal and the Commissioner of Income-tax (Appeals) held both the issues in favour of the assessee. The Revenue took up the issues before the Appellate Tribunal and the Tribunal also decided the issues in favour of the assessee. Hence, this appeal by the Revenue raising the following questions of law: "1. Whether, on the facts and circumstances of the case, the Tribunal was right in allowing a deduction of the amounts spent on replacement of machinery as revenue expenditure? 2. Whether, o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Appellate Tribunal, finding that replacement of machinery is revenue expenditure, held that the claim of the assessee cannot be disallowed. This court, in CIT v. Janakiram Mills Ltd. [2005] 275 ITR 403, held that all plant and machinery put together amounts 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. In view of the ratio laid down by this court in the decision cited supra, we hold that the expenditure on replacement of machinery is revenue expenditure and therefore, the Tribunal was right in allowing the claim of the assessee. With regard to question No. 3, this court in the dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent. The assessees replaced the worn out part of machineries without discontinuing their production activities. No claim for depreciation was ever made before any authorities either by the assessees or by the Revenue to consider the question as block of assets nor was there any necessity to do so. The Department did not raise any objection before the Tribunal regarding the claim of allowance on the premise of the block of assets concept. It is, therefore, stated that such question does not arise out of the order of the Appellate Tribunal for considering the same by this court under section 260A." In the instant case also, the assessee had only replaced the auto coner and moulds without discontinuing their production activities and that th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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