TMI Blog1996 (8) TMI 54X X X X Extracts X X X X X X X X Extracts X X X X ..... while computing the income for the assessment year 1977-78 ?" The assessee is a public limited company engaged in the manufacture of cotton yarn at Salem. For the assessment year 1977-78 in respect of which the previous year ended with March 31, 1977, the assessee had to replace a false ceiling covered by hardboard. There was a ceiling of about 60,478 sq. ft. all covered by hardboard which was replaced by asbestos cement sheet over a period of three years. The work of replacement commenced from 1974. The total outlay was Rs. 2,86,024. According to the Inspecting Assistant Commissioner, this expenditure was capital in nature while the assessee claimed it to be a revenue expenditure. Considering that the expenditure in question was capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re us learned standing counsel for the Department submitted that the replacement of hardboard by the asbestos cement sheets is substantial in nature which will bring an enduring benefit to the assessee. Inasmuch as the advantage which the assessee will get was in the capital field, the expenditure incurred for replacing the hardboard by asbestos cement sheets would amount to expenditure incurred in the capital field. On the other hand, learned counsel for the assessee pointed out that the Tribunal recorded a finding that the false ceiling put up in hardboard had become old and worn out having been in existence for more than twenty years and the replacement of such ceiling even by the asbestos sheets did not bring in any new asset or advan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er Screen Enterprises v. CIT [1972] 85 ITR 578, the Punjab and Haryana High Court, while considering the distinction between capital expenditure and revenue expenditure, pointed out that : There is no dearth of decided cases wherein the controversy whether certain expenditure is capital or revenue fell for determination. Some of these decisions have tried to lay down certain principles which are merely aids to the determination of such controversy. Yet, it must be recognised that those tests are not the conclusive tests. It is difficult to formulate a test which will always suffice to discriminate between expenditure which is not capital and expenditure which is capital. As a working rule, what has to be seen is whether the expense incurr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n roller stands and fluted rollers fitted with rubber aprons to the spinning machinery, removal of ring-frames from certain existing parts, introduction, inter alia, of ball-bearing jockey-pulleys for converting the original band drivers to tape-drivers and other additions and alterations in the drafting mechanism as revenue expenditure. The Supreme Court pointed out that the assessee is not entitled to development rebate on these items as the assessee claimed the relief by treating this expenditure as revenue in nature. In CIT v. Sree Bhagavathi Textiles Ltd. [1994] 207 ITR 826, the Kerala High Court held that the expenditure involved for modernisation of machinery is imperative in the business carried on by the assessee and is revenue exp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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