COMMISSIONER OF INCOME TAX vs GENERAL FIBRE DOALERS LTD.

BHAGABATI PRASAD BANERJEE, J. :

The Tribunal has referred the following question of law to this Court under s. 256(1) of the IT Act, 1961 :

"Whether on the facts and in the circumstances of the case, the Tribunal was justified in law in allowing the expenditure of Rs. 78,000 incurred for conversion of oil firing equipment to coal firing one as revenue expenditure ?"

The assessment year involved is 1976-77 for which the relevant year of account for the financial year ending on 31st March, 1976.

The facts of this case in short are as follows :

The assessee is limited company. The assessment year involved in the case in 1976-77.

In course of the examination of the accounts of the assessee the ITO found that a total sum of Rs. 78,000 was spent in converting the stoves (driers) from oil firing to coal firing system. The assessee claimed the same as business expenditure. The ITO held that the said expenditure was not in the nature of current repairs but represented expenditure of capital nature. He, therefore, disallowed the said claim of the assessee.

Against such disallowances the assessee filed an appeal before the CIT(A). It was submitted by the assessee before the CIT(A) that the expenses incurred for the conversion of the system were revenue expenditure. The CIT(A) held that the expenditure incurred on the conversion of stoves should be allowed under s. 37(1) of the Act.

Against the said finding of the CIT(A) the department filed an appeal before this Tribunal. The department submitted before the Tribunal that the CIT(A) should not have allowed the amount under s. 37(1) of the Act as these formed capital expenditure. The Tribunal held that the CIT(A) was correct in allowing the expenditure of Rs. 78,000 for conversion of the oil firing equipment to coal firing one under s. 37(1) of the Act.

The machine was changed. The only thing that was done was that there was a conversion of oil firing equipment for better working of the machine. No plant and machinery was brought into existence. Only for better operating this was made.

On behalf of the assessee, nothing was stated that the order of the Tribunal was wrong. In our view, the Tribunal has taken a correct view in this matter. In that view of the matter, the question of law is answered in the affirmative and in favour of the assessee.

There will be no order as to costs.

SUHAS CHANDRA SEN, J. :

I agree.