Law:

Section:

Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of - Assessment year 1990-91 - Assessing authorities rejected claim of assessee for deduction in respect of provision to meet breach of certain export obligation on ground that amount claimed did not relate to current assessment year - Whether Tribunal was justified in sustaining action of lower authority in denying deduction under section 37(1) - Held, yes Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of - Assessee-company had installed a splicer and stripping roller for improved performance of its machines - Splicer was meant to join broken ends of yarn and stripping roller was attached to carding machines for purpose of cleaning - Assessing authority rejected assessee's claim of said expenditure being revenue expenditure - Whether mere fact that work performed by these two machines was earlier done manually would not make these items of machinery fall outside revenue field and, therefore, Tribunal was not correct in holding that replacement expenditure on machines was on capital field and not on revenue field - Held, yes P.P.S. Janardhana Raja for the Applicant. T.C.A. Ramanujam for the Respondent. JUDGMENT R. Jayasimha Babu, J. - Two questions have been referred to us at the instance of the assessee. The assessment year is 1990-91. The questions are: "1. Whether, on the facts and circumstances of the case, the Appellate Tribunal was right in sustaining the action of the lower authorities in denying the deduction under section 37(1) of the Act on the provision for Rs. 8,50,000 created towards breach of certain export obligation based on director's order dated November 20, 1989 ? 2. Whether, on the facts and circumstances of the case, the…

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