- (1.) The present appeal has been filed against the judgment and order dated July 3, 2002 passed by the High Court of Gujarat at Ahmedabad in Income Tax Reference No. 141 of 1989. The following question of law has been raised in the appeal : "Whether the High Court was right in law in holding that the assessee was entitled to deduction on account of revenue expenditure incurred on machinery replaced for the value of Rs. 26,84,235?"
(2.) Briefly stated the facts, which give rise to this appeal, are as follows : The respondent-assessee is a public limited company and is engaged in the business of manufacturing cotton yams and textile. During the assessment year 1974-75, the respondent-assessee has claimed deduction of Rs. 35,49,011 as repairs and replacement of machinery expenditure on conversion material, etc. The assessing authority disallowed a sum of Rs. 27,71,270 out of the aforesaid revenue expenditure claimed by the respondent on the ground that it related to installation of the above machinery and is in the nature of outlay of capital expenditure.
(3.) Feeling aggrieved, the respondent-assessee preferred appeal before the Commissioner of Income-tax (Appeals). The Commissioner of Income-tax (Appeals) vide order dated September 29, 1983 allowed Rs. 26,84,235 as admissible revenue expenditure and at the same time directed the Assessing Officer to withdraw the depreciation and development rebate granted on these capitalized items, as they have been treated as revenue expenditure.;