- (1.) THE Income -tax Appellate Tribunal, Allahabad Bench, Allahabad, referred the following question relevant to the assessment year 1979 -80 for the opinion of this court: Whether, on the facts and circumstances of the case, the Tribunal was legally correct in holding that the expenditure by the assessee on replacement on one turbine rotor amounting to Rs. 1,05,44,904 was on account of current repairs and as such, it was revenue account expenditure
(2.) THE facts of the case in brief are as follows: The respondent -assessee is a captive power plant for M/s. Hindustan Aluminium Corporation Ltd. (Hindalco). It is a hundred per cent, subsidiary company of Hindalco. During the relevant assessment year 1979 -80 it had two thermal power plants of generating capacity of 67.5 MW each. During the assessment year in question, the assessee claimed revenue expenditure to the extent of Rs. 1,05,44,904 as cost of turbine rotor. The said expenditure was disallowed by the assessing authority as it was treated as a capital expenditure. The order of the assessing authority was confirmed by the first appellate authority. In second appeal, the Tribunal after making analysis of facts has recorded a finding that the assessee incurred the expenditure in the ordinary course of business for replacement of the turbine rotor. The Tribunal has also found that the replacement of turbine rotor is not a separate and distinct machinery. The Tribunal has further noted that it was only a part of the machine of turbo generator set which is used for generating electricity. The Tribunal treated it a case of repair having been carried out by the assessee by replacing damaged and unserviceable turbine rotor by a new rotor. On these facts the Tribunal accepted the claim of the assessee. Shri R.K. Upadhyaya, learned standing Counsel in support of the reference has placed reliance upon a judgment of the House of Lords in Hinton (Inspector of Taxes) v. Maden and Ireland Ltd. [1960] 39 ITR 357. He submits that turbine rotor is a plant and therefore the expenditure incurred by the assessee in its replacement is a capital expenditure.
(3.) IN contra, Shir R.K. Morarka, learned Counsel for the assessee submits that on the facts recorded by the Tribunal in its order, it is a case of repair and has placed reliance upon a Division Bench judgment of this Court in the case of CIT v. Kanodia Cold Storage : [1975]100ITR155(All) .;