Law:

Section:

Section 37(1) of the income-tax act, 1961-Capital or revenue expenditure-Assessee claimed certain items of expenditure out of total expenditure on modernisation of its mills as revenue expenditure-Revenue claimed that though individual items of expenditure were revenue, aggregate of such expenditure was capital expenditure-Whether revenue's claim justified-Held, no Section 256(2) of the income-tax act, 1961-Reference-Question of fact-Assessee's claim for deduction of certain expenditure as revenue expenditure upheld on the basis of facts by tribunal-Whether a question of law arose from tribunal's order-Held, on facts, no Facts The assessee incurred an expenditure of Rs. 29 lakhs in the modernisation of its mills. The assessee claimed a sum of Rs. 6,53,463, representing cost of modernisation of the mills machinery as revenue expenditure and its claim was eventually upheld by the Tribunal. On reference under section 256(2), the revenue conceded that individual items of expenditure allowed as revenue expenditure may be revenue expenditure but it contended that if one consider the entirety of the expenditure as a whole, it would be a capital expenditure : Held 1. When individual items of expenditure have been treated as revenue expenditure, the sum total thereof cannot be treated as a capital expenditure. 2. The decision of the Tribunal was based completely on facts and hence no question of law as such arose. JUDGMENT Ramaswami, J-The following question is sought to be referred in this matter: "Whether, on the facts and in the…

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