Machinery Replacement Cannot Be Treated as Revenue Without Proper Test: Madras HC

CIT Vs Super Spinning Mills Ltd. (Madras High Court) The case concerns the treatment of expenditure incurred on replacement of machinery by an assessee engaged in the manufacture and sale of cotton/blended yarn. For Assessment Year 1996–97, the assessee filed its return declaring income of ₹6,03,371 and claimed deduction of ₹6,19,43,673 incurred on replacement of machinery as revenue expenditure. The Assessing Officer disallowed the claim, holding that the replaced machinery consisted of independent, modern, and sophisticated machines capable of higher production and improved quality. Th...