Madras High Court
Commissioner Of Income-Tax vs Gitanjali Mills Ltd. on 9 October, 2002
Equivalent citations: [2004]265ITR681(MAD)
Author: R. Jayasimha Babu
Bench: R. Jayasimha Babu, K. Raviraja Pandian
JUDGMENT
R. Jayasimha Babu J.
1. The questions referred to us at the instance or the Revenue, for our consideration are :
"1. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in law in holding that the expenditure incurred by the assessee during the accounting year on replacement of machinery at Rs. 63,80,131 was amount paid on current repairs and was allowable under Section 31 of the Act ?
2. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is correct in law in deducting the expenditure incurred on purchase of ring frames while computing the book profits under Section 115J ?"
2. The assessment year is 1990-91.
3. The Tribunal, followed the considered order made by it for the assessment year 1979-80 in respect of the same assessee, which order has become final. T.C. P. No. 86 of 1986 filed by the Revenue seeking a reference having been rejected by it has held that the expenditure incurred by the assessee on the replacement of ring frames is revenue in character. Similar claim made by the assessee in the assessment year 1984-85 had been allowed by the Assessing Officer.
4. The Tribunal has not held that several replacement is by way of current repairs. It has proceeded to rest its conclusion on the finding that the ". . . expenditure incurred on the replacement of ring frames was revenue in nature". In other words that the expenditure was not in the nature of capital expenditure.
5. The Tribunal has, in its order for the assessment year 1979-80 held that the ring frames have no independent existence or utility unless worked with other machines, that its function is ancillary, that it is only a supporting machine, used for drafting, twisting and winding the yarn, that they by themselves are not machines capable of independent function, and therefore the cost incurred on such ring frames is not dissimilar in nature and character say to the replacement of a radiator or a carburettor in a motor engine.
6. The ring frames replaced in this assessment year were in place of frames which were decades old and replacement of which had become unavoidable, the only gain for the assessee, by such replacement being the efficient functioning of the frames without intermittent breakdowns.
7. The first question referred needs to be reframed deleting the reference therein to current repairs and substituting Section 37 in place of Section 31.
The question reframed is answered in favour of the assessee. The second question is also answered in favour of the assessee, as it is only consequential to the first.