Law: Income Tax Act, 1961

Section: 37,256,256(2)

Income-tax--Reference---Capital or revenue expenditure---Finding that expenditure on replacement of certain items forming part of machinery did not enhance capacity of machinery ----Finding of fact---Finding not challenged as being perverse---Tribunal justified in holding that expenditure was revenue in nature---No question of law arose from its order---Indian Income Tax Act, 1961, Ss.37 & 256(2). Held, dismissing the application to direct reference, that the question whether on a given set of facts, replacement of certain items, forming as integral or important part of the machinery would be revenue ­expenditure or capital expenditure is primarily a question of fact. The Tribunal had reached the conclusion, that the moulds in question did not enhance the capacity of the existing, machines and were mere replacements for the moulds damaged during the process of-manufacture of glass. It was also evident from the format of the question, proposed by the Revenue, that the finding of the Tribunal to the effect that the expenditure in question was incurred by the assessee on the "replacement" of the moulds was not under challenge. In view of the aforenoted finding recorded by the Tribunal, it was justified in holding that the expenditure was revenue in nature. No question of law arose from its order. CIT v. Mysore Spun Concrete Pipe (Pvt.) Ltd. (1992) 194 ITR 159 (Kar.) and Empire Jute Co. Ltd. v. CIT (1980) 124 ITR 'l (SC) ref. JUDGMENT By this application under section 256(2) of the Income Tax Act, 1961, (for short "the Act")., Revenue seeks a direction to the Income-tax Appellate Tribunal to state the case and refer the following question, in respect' of the assessment year 1982-83, for the opinion of this Court: "On the facts and circumstances of the case and in law, whether the Tribunal has erred to hold that the expenditure incurred on replacement of moulds is a revenue expenditure?" During the relevant previous year ending on December 31, 1981, the assessee spent a sum of Rs.3,99,580 on the purchase of moulds for manufacturing the glass and debited the same to the profit and loss account. While completing the assessment for the relevant assessment year the…

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