COMMISSIONER OF INCOME TAX, MADURAIversusM/S. SRI MANGAYARKARASI MILLS (P) LTD.

                             [2009] 10 S.C.R. 1187


                COMMISSIONER OF INCOME TAX, Ml\DURAI                      A
                                     v.
                         '
                M/S. SRI MANGAYARKARASI MILLS (P) LTD.
                      (Civil Appeal No. 4579 of 2009)
                                JULY 21, 2009
                                                                          B
               [TARUN CHATTERJEE AND AFTAB ALAM, JJJ
     ,I


               Income Tax Act; 1961: Expenditure incurred on
          replacement of machinery in a textile/spinning mill system -
          Held: Is capital expenditure - It is neither deductible under   c
          s.37 as revenue expenditure nor under s.31 as current
          repairs.

              The question which arose for consideration in the
          present appeal was whether the expenditure incurred on          D
          replacement of machinery in a textile/spinning mill
          system amounts to capital expenditure or revenue
          expenditure deductible under Section 37 of the Income
          Tax Act, 1961 or current repairs deductible under Section
          31 of the Act.
                                                                          E
      •       Allowing the appeal, the Court

               HELD: 1.1. Each machine in a segment of a textile
          mill has an independent role to play in the mill and the
          output of each division is different from the other. Each F
          machine in a textile mill is part of the integrated process
          of manufacture of yarn and is integrally connected to the
          other machines in the mill for production of the final
          product. However, this interconnection does not take
          away the independent identity and distinct function of G
          each machine. Thus, each machine in a textile mill should
          be treated independently as such and not as a mere part
          of an entire composite machinery of the spinning mill.
          [Para 14] [1106-F-H; 1107-A]
                                     1187                                 H

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    1188      SUPREME COURT REPORTS (2009] 10 S.C.R.


A       CIT v. Saravana Spinning Mills (P) Ltd. (2007) 7 SCC
    298, relied on.

       Ballimal Naval Kishore and Another v. CIT 224 ITR 414;
  CIT v. Loyal Textile Mills Ltd. 284 ITR 658; Commissioner
  of Income Tax vs. Madras Cements Ltd., 255 ITR 245 and
8
  CIT v. Mahalakshmi Textile Mills Ltd. AIR 1968 SC 101,
  referred to.

        1.2. In order to determine whether a particular
   expenditure amounts to 'current repairs' the test is
C "whether the expenditure is incurred to 'preserve and
   maintain' an already existing asset and not to bring a new
   asset into existence or to obtain a new advantage. For
   'current repairs' determination, whether expenditure is
   revenue or capital is not the proper test." The entire
D textile mill machinery cannot be regarded as a single
   asset, replacement of parts of which can be considered
   to be for mere purpose of 'preserving or maintaining' this
   asset. All machines put together constitute the
   production process and each separate machine is an
E independent entity. Replacement of such an old machine
   with a new one would constitute the bringing into
   existence of a new asset in place of the old one and not
   repair of the old and existing machine. Also, a new asset
   in a textile mill is not only for temporary use. Rather it
F gives the purchaser an enduring benefit of better and
   mcire efficient production over a period of time. Thus,
   replacement of assets cannot amount to 'current repairs' .
  .The expenditure made by the assessee cannot be
   allowed as a deduction under section 31 of the Income
G Tax Act. [Para 15] [1197-8-H]

        1.3. The expenditure is deductible under section 37
    only if it (a) is not deductible under sections 30-361 (b) is
    of a revenue nature, (c) is incurred during the current
    accounting year and (d) is incurred wholly and
H
  COMMNR. OF INCOME TAX v. SRI MANGAYARKARASI 1189
                 MILLS (P) LTD.

exclusively for the purpose of the business. The             A
assessees' expenditure satisfies requirements (a), (c) and
(d) as stated above. The dispute is with respect to the
nature of expenditure, that is, whether it is revenue or
capital in nature. The expenditure is of a capital nature
when it amounts to an enduring advantage for the             B
business and repair is different from bringing a new
asset for the business. Bringing into existence a new
asset or an enduring benefit for the assessee amounts
to capital expenditure. The expenditure of the assessee
in this case is capital in nature. Since replacement, in     c
this case, amounts to bringing into existence a new asset
and also an enduring benefit for the assessee,
expenditure is not of a revenue nature and thus, cannot
be claimed as a deduction under section 37 of the Act.
[Para 16 and 17] [1198-F-G; 1199-A-C]                        D

     Travancore Cochin Chemicals Ltd. v. CIT (1997) 2 SCC
20; Lakshmiji Sugar Mills (P) Co. v. CIT AIR 1972 SC 159,
relied on.

    CIT v. Janakiram Mills Ltd. 275 ITR 403, disapproved.    E

     2. It is clear on record that the assessee has sought
to treat the said expenditure differently for the purposes
of computing its profit and for the purpose of payment
of income tax. The said expenditure has been treated as
                                                             F
an addition to the existing assets in the former and as
revenue expenditure in the latter. Though accounting
practices may not be the best guide in determining the
nature of expenditure, in this case they are indicative of
what the assessee itself thought of the expenditure it
made on replacement of machinery and that the claim for      G
deduction under the Act was made merely to diminish
the tax burden, and not under the belief that it was
actually revenue expenditure. [Para 20] [1200-C-D]

                                                             H
    1190       SUPREME COURT REPORTS [2009] 10 S.C.R.


A                        Case Law Reference:

        224 ITR 414                 referred to         Para 4

        284 ITR 658                 referred to         Para 8

        275 ITR 403                 disapproved         Para 8
B
        255 ITR 245                 referred to         Para 11

        (2001) 1 sec 298            relied on           Para 14
        AIR 1968 SC 101             referred to         Para 15
c
        (1997) 2 sec 20             relied on           Para 17
        AIR 1972 SC 159             relied on           Para 17

      CIVIL APPELLATE JURISDICTION : Civil Appeal No.
D 4579 of 2009.

        From the Judgment & Order dated 18.12.2006 of the High
    Court of Judicature at Madras in Tax Case (Appeal) No. 30 of
    2005.

E         Vikas Singh, ASG, Vikas Sharma, H. Raghavendra Rao,
    Arijit Prasad and B.V. Balaram Das for the Appellants.

        Radha Rangaswamy for the Respondent.

        The Judgment of the Court was delivered by
F
           TARUN CHATTERJEE, J. 1. Leave granted.

       2. This appeal has been filed by the appellant to challenge
  the judgment and order of the High Court of Madras dated 18th
G of December, 2006 whereby the High Court had dismissed the
  appeal filed by the revenue holding that the expenditure on
  replacement of machinery was revenue in nature and thus,
  allowable as deduction under the Income Tax Act, 1961
  (hereinafter referred to as the 'Act').
H
        COMMNR. OF INCOME TAX v. SRI MANGAYARKARASI 1191
            MILLS (P) LTD. [TARUN CHATTERJEE, J.]

            3. The relevant facts as arising from the case made out         A
      by the parties, leading to the filing of this appeal, and which
      will help us in understanding the controversy involved, can be
      summarized as under :-

           The Respondent in this appeal is engaged in the                  B
      manufacture and sale of cotton yarn. During the assessment
      year 1995-1996 the assessee claimed an amount of Rs. 61,
      28, 1501-, being expenditure incurred on replacement of
      machinery, as revenue expenditure. The assessee believed that
      such expenditure was merely expenditure on replacement of             C
      spare parts in the spinning mill system and, therefore,
      amounted to revenue expenditure.

             4. The Assessing Officer (AO) did not, however, accept
       this view of the assessee because, according to him, each ,
       machine in a spinning mill does a different function and the D
       product from one machine is taken and manually fed into
       another machine and the output is taken, all the machines are,
       thus, not integrally connected. Based on this reasoning, the AO
       disallowed the above claim of the assessee and held the said
       expenditure to be of a capital nature. The AO, in passing this E
       order dated 31st of December, 1997, followed the decision of
       the Income Tax Appellate Tribunal (ITAT) Madras "C" Bench in
       the case of Mis. Nagammal Mills Ltd. V. DC/T dated 31st of
       October, 1997 (rendered in LT.A No. 2774/Mds/93/90-91) and
       also the decision of this Court in Ballimal Naval Kishore and F
       Another v. CIT (224 ITR 414) in which it was held that any
       capital expenditure claimed by the assessee for acquiring plant
       and machinery, buildings, fixed assets, etc., cannot be treated
       as repairs or renewals, and, therefore, it cannot be held as
       revenue expenditure in the year of acquisition of such fixed G
       assets. The AO further held that the assessee had treated the
       said expenditure as capital expenditure by capitalizing the
       assets in the books of account and had, thus, shown profit in
       its profit and loss account to third parties, like bankers, financial
     , institutions, creditors, shareholders, etc. However, from the tax
                                                                             H


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    1192       SUPREME COURT REPORTS [2009] 10 S.C.R.


A point of view, the respondent wanted to reduce the net profit
  and the total taxable income by claiming such huge expenditure
  in the statement of total income computation for acquisition of
  fixed assets, as revenue expenditure. Therefore, he disallowed
  such expenditure of the assessee to be covered under section
s 31 of the Act or as revenue expenditure under section 37 of
  the Act. The AO further held that the assessee could claim
  depreciation on the said assets as pei the income tax rules.

       5. An appeal was preferred by the Respondent against the
  said order of the AO before the Commissioner of Income Tax
C (CIT) (Appeals)-1, Madurai. The Commissioner of Income Tax
  (CIT) (Appeals)-1, Madurai, by its order dated 12th of March,
  1998 in Appeal No. 324/97-98, allowed the appeal of the
  assessee, inter alia, holding that replacement of machinery by
  the assessee in this case constituted revenue expenditure. In
D allowing the claim of the assessee, the CIT (Appeals) followed
  its own order for the Assessment Year 1991-92 wherein a
  similar allowance was granted in favour of the assessee.

        6. Against this order of the CIT (Appeals), the revenue
E department went in appeal before the Tribunal. The appeal was
  disposed of by the ITAT, Chennai Bench-C in ITA No. 1139/
  Mad/1998 by its order dated 16th of June, 2004. The tribunal
  followed the decision of the Madras High Court wherein it was
  decided that replacement of ring frame is only replacement of
F part of the machinery in the textile mills. The tribunal, thus,
  upheld the order of the CIT (Appeals) and dismissed the appeal
  of the revenue.

        7. Aggrieved by the said order of the Tribunal, the revenue
  filed an appeal under section 260A of the Act before the High
G Court of Judicature at Madras.

       8. The High Court, relying on its own decision in CIT v.
  Janakiram Mills Ltd. (275 ITR 403) and CIT v. Loyal Textile
  Mills Ltd. (284 ITR 658), by its order dated 18th of December,
H 2006, dismissed the appeal filed by the revenue and held that
       COMMNR. OF INCOME TAX v. SRI MANGAYARKARASI 1193
           MILLS (P) LTD. [TARUN CHATTERJEE, J.]

     . the expenditure on replacement of machinery was revenue in A
       nature. The High Court further held that the question whether
       the expenditure on replacement of machinery was capital or
       revenue in nature was not determined by the treatment given
       to it by the assessee in the books of accounts or in the balance
       sheet. The claim has to be determined only by relying on the B
       provisions of the Act and not by the accounting practice
       followed by the assessee.

          9. The main question that needs to be decided in this
      appeal may be formulated as follows : -
                                                                       c
                "Whether expenditure incurred on replacement of
          machinery, in the facts and circumstances of this case,
          amounts to 'revenue expenditure' deductible under section
          37 of the Act or 'current repairs' deductible under section
          31 of the Act."                                             D

           10. It is pertinent to mention here that the respondent only
      stated that its claim was limited to the expenditure being of a
      revenue nature and thus allowable under section 37 of the Act.
      Nowhere had the Respondent claimed that the said expenditure E
      amounted to 'current repairs' under section 31 of the Act.
      Further, the appellant itself had restricted the issue to that of
      revenue expenditure in its appeal to the High Court of Madras,
      against which it has now filed this appeal. According to the
      Respondent, there is no issue regarding the expenditure F
     amounting to 'current repairs' under section 31 of the Act. We
     are not inclined to uphold this submission of the Respondent.
     The fact that the appellant has contended before the courts
     below that each of the item of machinery in a spinning mill is
     independent, that the respondent has argued against it, and has
     given evidence to try to support its contention, and also that the G
     assessee believes that replacement is only of spare parts in
     the entire system of the spinning mills, makes it clear that a
     question has arisen here as to whether replacement of one or
     more items of machinery amounts to repair of the entire
     integrated machinery of the spinning mill or acquisition of a new H


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    1194        SUPREME COURT REPORTS [2009) 10 S.C.R.


A   independent machinery.

          11. The learned counsel for the appellant submitted that
     the courts below erred in rejecting the contention of the
    department that each item of machinery in a textile mill should
     be treated as independent and not an integral part of the whole
8
     plant of the spinning mill. The Madras High Court has held in
     the case of Commissioner of Income Tax vs. Madras
     Cements Ltd. (255 ITR 245) that each item of machinery in a
    cement factory has to be considered as being an independent
    machinery. Learned counsel for the appellant, further, contended
C   that the scheme of production in a textile mill is similar to the
    integrated scheme of production in a cement factory, where no
     independent commodity can be said to have been produced
    before it, which is a ground in a roller mill. As per the learned
    counsel for the appellant, the courts below erred in
D   distinguishing this decision of the Madras High Court. Thus,
    given that each item of machinery is independent, the
    replacement of any such machine will amount to acquisition of
    a new asset and not 'repair' of the entire integrated machinery
    of the spinning mill. In this connection, reliance was placed on
E   a decision of this Court in Bal/imal Naval Kishore (supra)
    wherein it is clearly held that 'current repairs' under the Act
    means expenditure on machinery, plant or furniture which is not
    for the purpose of renewal or restoration but which is only for
    the purpose of preserving or maintaining an already existing
F   asset and that does not bring a new asset into existence or
    does not give to the assessee a new or different advantage.
    Learned counsel for the appellant further contended that
    replacement of old machinery with new machinery cannot be
    considered as current repairs as such or even revenue
G   expenditure, since it gives an enduring benefit to the assessee.
    Also, if in every case such replacement is allowed as revenue
    expenditure the principle of allowing depreciation will lose its
    significance. Learned counsel further submitted that the courts
    below erred in overlooking the definitions of 'assets' and 'block
H   of assets' under explanation 3 of section 32(1 )(ii) of the Act and
 COMMNR. OF INCOME TAX v. SRI MANGAYARKARASI 1195
     MILLS (P) LTD. [TARUN CHATIERJEE, J.]

thus, misconstruing the provision for composition of the 'block     A
of assets' as per the definition of 'written down value' as given
under section 43(6}(C) of the Act, which aid the charging
section 28, as to the assessability of income from business and
profession. Learned counsel for the appellant further contended
that the courts below had gone wrong in equating the                B
complicated machinery of a spinning mill with a tube-light in
relying on the Boards' Circular No, 69 dated 27th of November,
1957 on "tube-lights" which stated that only first time purchase
of a tube-light amounts to capital expenditure, and subsequent
replacement would only be revenue expenditure. Lastly, learned      c
counsel for the appellant emphasised that the reliance on the
decision in Janakiram Mills (supra) case by the High Court was
misplaced, in as much as the High Court had failed to
appreciate that an appeal had already been filed against it
before this Court and thus the decision of the High Court in the
                                                                    0
Janakiram Mills (supra) case was not final and binding.

     12. The learned counsel for the respondent submitted that
the respondent had incurred expenditure for replacing the old
and worn out parts of machinery of the spinning mill. They are
 merely parts of the spinning mill, dependent on other parts of E
the textile mill, and the replaced machinery cannot function
independently. Further, the learned counsel for the respondent
argued that the High Court rightly distinguished the Madras
Cements Ltd. (supra) case because in that case the whole plant
was relocated and in its place a whole new plant was installed. F
The learned counsel for the respondent further argued that the
case of Ballimal Naval Kishore (supra) is not applicable here
because in that case a ginning factory was converted to a
cinema theatre and what the assessee there did was not
replacement of machinery parts of an integrated plant but total G       _.
conversion into a th_eatre. The learned counsel for the
respondent has contended that the provisions relating to
'assets' and 'block of assets' are immaterial in the instant case,
which deals with revenue expenditure on replacement of
machinery and would not come under 'block of assets'. Further, H
    1196       SUPREME COURT REPORTS [2009] 10 S.C.R.


A the learned counsel for the respondent also relied on the
   Boards' Circular No. 69 dated 27th of November, 1957 which,
  the respondent claimed, is still valid and as per which,
  replacement of worn out parts, even if the same is in a textile
  mill, would constitute revenue expenditure. The learned counsel
B for the respondent has also argued that the argument of
  enduring benefit to the respondent, taken by the appellant, is
  no longer a good law. Lastly, learned counsel for the respondent
  submitted that the High Court was right in relying on its own
  judgment in the case of Janakiram Mills Ltd. (supra) because
c this Court, by its order dated 21st of August, 2007 in Civil
  Appeal No. 7594/2005, has already pronounced upon the
  validity of the judgment of the High Court in that matter and has
  disposed of the appeal in the same.

       13. We have heard and considered all these contentions
D of the learned counsel for the parties and also perused the
  materials on record and also examined the impugned order
  passed by the High Court.

        14. The first issue that needs to be resolved is whether
E each machine in a textile mill is an independent item or merely
  a part of a complete spinning mill, which only together are
  capable of manufacture, and there is no intermediate
  marketable product produced. In our view, this issue has been
  satisfactorily answered by the recent decision of this Court in
F CIT v. Saravana Spinning Mills (P) Ltd. (2007) 7 SCC 298).
  In that case this Court has held unambiguously that "each
  machine in a segment of a textile mill has an independent role
  to play in the mill and the output of each division is different
  from the other." Dealing with a ring frame in a textile mill, this
G Court has held that it is an "independent and separate"
  machine. Further, it is accepted that each machine in a textile
  mill is part of the integrated process of manufacture of yarn and
  is integrally connected to the other machines in the mill for
  production of the final product. However, this interconnection
  does not take away the independent identity and distinct
H
      COMMNR. OF INCOME TAX v. SRI MANGAYARKARASI 1197
          MILLS (P) LTD. [TARUN CHATIERJEE, J.)

     function of each machine. Thus, each machine in a textile mill         A
~-
     should be treated independently as such and not as a mere
     part of an entire composite machinery of the spinning mill. As
     stated above, it can at best be considered part of an integrated
     manufacture process employed in a textile mill.
                                                                            B
            15. Moving on to the issue of 'current repairs' under section
     31 of the Act, the decision of this Court in CIT v. Saravana
      Spinning Mills (P) Ltd. (supra) is again relevant. This court has
     laid down that in order to determine whether a particular
     expenditure amounts to 'current repairs' the test is "whether the      C
     expenditure is incurred to 'preserve and maintain' an already
     existing asset and not to bring a new asset into existence or
     to obtain a new advantage. For 'current repairs' determination,
     whether expenditure is revenue or capital is not the proper test."
      It is our opinion that the entire textile mill machinery cannot be
 .    regarded as a single asset, replacement of parts of which can         D
      be considered to be for mere purpose of 'preserving or
     maintaining' this asset. All machines put together constitute the
      production process and each separate machine is an
      independent entity. Replacement of such an old machine with
      a new one would constitute the bringing into existence of a new       E
      asset in place of the old one and not repair of the old and
     existing machine. Also, a new asset in a textile mill is not only
     for temporary use. Rather it gives the purchaser an enduring
     benefit of better and more efficient production over a period of
     time. Thus, replaceiment of assets as in the instant case cannot       F
     amount to 'currerut repairs'. The decision in Saravana Mills
     (supra) case clearly mentions that replacement of a derelict ring
     frame by a new one does not amount to 'current repairs'.
     Further in Ba!lima.I Naval Kishore (supra) this Court has held
     that a new asset or new/different advantage cannot amount to           G
     'current repairs', which has been subsequently approved in the
     Saravana Mills (supra) case. For these reasons, the
     expenditure made by the assessee cannot be allowed as a
     deduction under s:ection 31 of the Act. The judgment of this
     Court in the Saravana Mills (supra) case mentions two                  H
    1198        SUPREME COURT REPORTS [2009] 10 S.C.R. .


A exceptions in which replacement could amount to current
                                                                        1i
  repairs, namely:

         *"Where old parts are not available in the market (as seen
         in the case of CIT v. Mahalakshmi Textile Mills Ltd. (AIR
         1968 SC 101), or
B
         * Where old parts have worked for 50-60 years."

  In the instant case, the assessee has not claimed any of the
  above stated exceptions. The Saravana Mills (supra) case also
c restricts the scope of 'current repairs' to repairs made to
  machinery, plant and/or furniture. In this case, replacement of
  machine can at best amount to a repair made to the process
  of manufacture of yarn. Further this court has also observed in
  Saravana Mills (supra) case that if replacement was held to
D be 'current repair' in such cases, section 31 (i) will be
  completely redundant and absurdity will creep in because repair
  implies existence of a part of the machine which has
  malfunctioned, which is impossible in the case of such
  replacement. Thus, this replacement expenditure cannot be
  said to be 'current repairs' after the decision in the Saravana
E
  Mills (supra) case.

        16. Given that section 31 of the Act is not applicable to
  the said expenditure of the assessee, the next issue is whether
  it can be considered 'revenue expenditure' of the nature
F envisaged under section 37 of the Act. The Saravana Mills
  (supra) case holds that expenditure is deductible under section
  37 only if it (a) is not deductible under sections 30-36, (b) is of
  a revenue nature, (c) is incurred during the current accounting
  year and (d) is incurred wholly and exclusively for the purpose
G of the business. We are satisfied that the assessees'
  expenditure satisfies requirements (a), (c) and (d) as stated
  above. The dispute is with respect to the nature of expenditure,
  that is, whether it is revenue or capital in nature.
         17. We are of the opinion that the expenditure of the
H
       COMMNR. OF INCOME TAX v. SRI MANGAYARKARASI 1199
           MILLS (P) LTD. [TARUN CHATIERJEE, J.]

     assessee in this case is capital in nature and there is sufficient   A
     judicial precedent to support this view. In the case of
     Travancore Cochin Chemicals Ltd. V. CIT (1997) 2 SCC 20)
     this Court held that expenditure is of a capital nature when it
     amounts to an enduring advantage for the business and repair
     is different from bringing a new asset for the business. Further,    B
     in Lakshmiji Sugar Mills (P) Co. v. CIT (AIR 1972 SC 159) it
     has been held by this Court that bringing into existence a new
     asset or an·enduring benefit for the assessee amounts to capital
     expenditure. We have already explained why replacement, in
     this case, amounts to bringing into existence a new asset and        c
     also an enduring benefit for the assessee. It is clear then that
     expenditure of the assessee here is not of a revenue nature and
     thus, cannot be claimed as a deduction under section 37 of the
     Act.

           18. As far as reliance on the High Court decision in           D
     Janakiram Mills (supra) case is concerned, the Saravana Mills
     (supra) case has clearly set aside the said judgment of the
      Madras High Court by its finding on the scope of 'current
      repairs' unlier section 31 of the Act. In CIT v. Ramaraju
      Surgical Cotton Mills (MANU/SC/8156/2007), where this court         E
     decided on the validity of the Madras High Court judgment in
,,   Janakiram Mills (supra), this court clarified that this High Court
     judgment has been set aside in the Saravana Mills (supra)
     case mainly on the ground that section 31 and section 37 of
     the Act, operate in different spheres and the tests applicable       F
     to section 31 cannot be read into section 37 of the Act. Further,
     even in the Ramaraju (supra) case, where this Court
     distinguished the Saravana Mills (supra) case on the ground
     that that appeal was with respect to deduction only under
     section 37 of the Act unlike the Saravana Mills (supra) case,        G
     this court set aside the High Court judgment in Janakiram Mills
     (supra) case and remitted the matter to the Commissioner
     (Appeals) to dispose of the matter in accordance with law. In
     the light of the observations made herein above, it is thus clear
     that the High Court decision in Janakiram Mills (supra) case         H
    1200       SUPREME COURT REPORTS (2009] 10 S.C.R.


A is not good law on which reliance may be placed.
                                                                       ...
       19. Consideration of the definition of 'assets' and 'block
  of assets' and the concept of depreciation under the Act is not
  required to be decided upon whether the expenditure incurred
B by the assessee is a deductible expenditure or not. Hence we
  are not inclined to discuss the same.

       20. It is clear on record that the assessee has sought to
  treat the said expenditure differently for the purposes of
  computing its profit and for the purpose of payment of income
c tax. The said expenditure has been treated as an addition to
  the existing assets in the former and as revenue expenditure
  in the latter. Though accounting practices may not be the best
  guide in determining the nature of expenditure, in this case they
  are indicative of what the assessee itself thought of the
D expenditure it made on replacement of machinery and that the        ...
  claim for deduction under the Act was made merely to diminish
  the tax burden, and not under the belief that it was actually
  revenue expenditure.

E        21. For the reasons aforesaid, we set aside the impugned
    judgment of the High Court, thereby restoring the judgment of
    the AO disallowing the claim of deduction of the respondent.

        22. The appeal is accordingly allowed. There will be no
    order as to costs.
F
    D.G.                                         Appeal allowed.