Replacement of machinery expenses treated as revenue expenditure and allowed as a deduction under prior precedent.

Expenditure on replacement of machinery booked under "machinery maintenance" was treated as revenue in nature and therefore deductible. The Kerala HC noted that the issue for assessment year 1984-85 was governed by its earlier ruling in the assessee's own case for assessment year 1983-84, where identical replacement costs had already been classified as revenue expenditure. Following that precedent, the replacement outlay was accepted as falling on revenue account and allowed as a deduction.

---

---

Issues: Whether expenditure incurred on replacement of machinery under the head "Machinery maintenance" was revenue in nature and allowable as a deduction.

Analysis: The reference concerned assessment year 1984-85. The controversy was treated as governed by the earlier decision in the assessee's own case for assessment year 1983-84, where the same nature of expenditure on replacement of machinery had been held to be revenue expenditure. Following that decision, the expenditure on replacement of machinery was accepted as falling on revenue account.

Conclusion: The expenditure incurred on replacement of machinery was held to be revenue expenditure and an allowable deduction.

---