Madras High Court
Commissioner Of Income-Tax vs Sakthi Textiles Ltd. on 25 March, 2003
Equivalent citations: (2004)187CTR(MAD)560, [2003]262ITR375(MAD)
Author: R. Jayasimha Babu
Bench: R. Jayasimha Babu, K. Raviraja Pandian
JUDGMENT R. Jayasimha Babu, J.
1. The assessment year is 1986-87.
2. The questions referred to us for our consideration are :
By the Revenue :
"Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in upholding the Commissioner of Income-tax (Appeals) finding that the cost of installation of overhead cleaner, speed frames and humidification plant is capital expenditure (sic) ?"
By the assessee "Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that the expenditure incurred in replacing the blow room machinery is not deductible as a revenue expenditure ?"
3. The machineries installed are overhead cleaner, speed frames and humidification plant. The order of the Assessing Officer does not give much information about the nature of the machineries. The Commissioner has held that the overhead cleaner was installed with a view to minimise the dust particles in the place of work and that the expenditure incurred for installation thereof is to be regarded as revenue expenditure, having regard to the object sought to be achieved by that installation, viz., to protect the health of the workmen. The expenditure was held to be allowable as revenue expenditure by reason of that fact, by the Commissioner. That view of the Commissioner has been affirmed by the Tribunal. That view is also in accordance with what has been held by this court in a case concerning the same assessee for an earlier assessment year in T. C. No. 672 of 1990 (CIT v. Sakthi Textiles ltd. [2001] 250 ITR 449). We, therefore, do not find any error in that finding of the Tribunal.
4. Regarding the speed frames, this court has, in the case of CIT v. Shri Rani Lakshmi Ginning Spinning and Weaving Mills Ltd. [2002] 256 ITR 592, held that expenditure on replacement of worn out speed frames does not fall within the capital field, but is an expenditure which has to be allowed as revenue expenditure. The finding of the Tribunal, which upheld the view of the Commissioner that such expenditure has to be treated as revenue expenditure, therefore, is in accordance with the law laid down by this court.
5. Regarding the humidification plant, the finding of the Tribunal which affirmed the view of the Commissioner is that the installation of the humidification plant is by way of replacement of an existing semi-automatic system and though there was improvement in efficiency by reason of a more modern system having been installed, nevertheless the purpose which was to be served was the same as that which was being served by the semi-automatic system which was replaced by the more modern system. The expenditure incurred on humidification plant is, therefore, expenditure in the revenue field and the finding to that effect by the Tribunal is not erroneous.
6. Regarding the blow room machinery it is the finding of the Tribunal as also of the Commissioner that it is a new item of machinery which did not exist in the factory earlier and it is not replacement. The expenditure in these circumstances is clearly in the capital field and the Tribunal is right in having held that the expenditure incurred on blow room machinery is expenditure in the capital field. The question referred at the instance of the Revenue is answered in favour of the assessee and against the Revenue. The question referred at the instance of the assessee is answered against the assessee and in favour of the Revenue.