Capital expenditure treatment of air conditioner replacement under buy-back scheme left open for hearing-stage determination

Replacement of air conditioners under an exchange or buy-back scheme, where no new asset is created in the block of assets, is identified as the central question on capital expenditure treatment. The matter was admitted by the HC and the stated question was directed to be considered at the hearing stage, but no final adjudication was made on whether the expenditure is capital or otherwise.

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Issues: Whether replacement of air conditioners under an exchange or buy-back scheme, without creating a new asset in the block of assets, is capital expenditure.

Outcome: The appeal was admitted and the stated question was directed to be considered at the hearing stage; no final adjudication was made on the issue.

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