EXPENDITURE ON REPLACEMENT OF MACHINERY - CAPITAL EXPENDITURE
The Supreme Court has set aside the judgment of the Madras high court which had declared that the
expenditure on replacement of machinery was revenue in nature and thus allowable as deduction under the Income Tax Act. The textile mill in the case, Commissioner of Income Tax vs. Sri Mangayarkarasi Mill Ltd., had claimed deduction on replacement of spare parts in the spinning unit, maintaining that it amounted to revenue expenditure. The assessing officer had rejected the claim of the textile mill and held the expenditure to be of a capital nature. The high court, however, accepted the mills' argument. The revenue department's appeal was allowed by the Supreme Court.
expenditure on replacement of machinery was revenue in nature and thus allowable as deduction under the Income Tax Act. The textile mill in the case, Commissioner of Income Tax vs. Sri Mangayarkarasi Mill Ltd., had claimed deduction on replacement of spare parts in the spinning unit, maintaining that it amounted to revenue expenditure. The assessing officer had rejected the claim of the textile mill and held the expenditure to be of a capital nature. The high court, however, accepted the mills' argument. The revenue department's appeal was allowed by the Supreme Court.
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