Madras High Court
Commissioner Of Income Tax vs Janakiraman Mills Limited Reported In ... on 1 December, 2009
Author: K.Raviraja Pandian
Bench: K.Raviraja Pandian
IN THE HIGH COURT OF JUDICATURE AT MADRAS Dated : 01.12.2009 Coram : THE HONOURABLE MR.JUSTICE K.RAVIRAJA PANDIAN and THE HONOURABLE MR.JUSTICE M.M.SUNDRESH Tax Case (Appeal)Nos.1224 and 1225 of 2009 Commissioner of Income Tax Coimbatore Appellant v. M/s Sri.Natesar Spg. & Wvg. Mills Ltd No.147/148, Perundhurai Road Erode Respondent Tax Case Appeals filed under section 260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal, Madras 'D' Bench, Chennai, dated 20.05.2005 in I.T.A.No.506/Mds/1997 for the assessment year 1994-95 and 1996-97. For appellant : Mr.J.Naresh Kumar JUDGMENT
(Judgment of the Court was delivered by K.RAVIRAJA PANDIAN, J.) By framing the following questions of law,
a) "Whether the replacement of machinery parts will amount to revenue expenditure or not? And
b) Whether bringing into existence of a new asset or obtaining a new advantage would amount to revenue expenditure or not?"
the revenue has come up by filing the appeals under Section 260 A of the Income Tax Act, 1961 against the order of the Tribunal dated 20th May 2005 made in I.T.A.No.506/Mds/1997 relating to the assessment year 1994-95 and 1996-97.
2. Facts: The assessee, a Spinning Mill replaced machineries. The assessee has claimed a sum of Rs.2,40,41,753/- in respect of assessment year 1994-95 and Rs.99.56 lakhs in respect of assessment year 1996-97 as expenditure relating to the replacement of machinery. The Assessing Officer disallowed the above claim and treated the cost of replacement of machinery as capital expenditure. The Commissioner of Income Tax appeal held that the replacement of the machinery is capital in nature. On appeal, the Tribunal held that the expenditure on replacement of machinery is revenue in nature following the judgment of this court in the case of Commissioner of Income Tax vs. Janakiraman Mills Limited reported in 275 ITR 403 dismissed the appeal. The correctness of the same is canvassed before this Court by filing these appeals.
3. We have heard the argument of the learned counsel and perused the materials available on record.
4. The issue has been considered by the Supreme Court as many in four Judgments. The first one is in the case of Commissioner of Income Tax vs. Saravana Spinning Mills Pvt Ltd reported in [2007] 293 ITR 201 in respect of current repairs. Thereafter in the case of Ramaraju Surgical Cotton Mills reported in [2007] 294 ITR 328 and with reference to Section 31 in the case of Commissioner of Income Tax vs. Sri Mangayarkarasi Mills P. Ltd reported in 315 ITR 114. Lastly, it was stated across the Bar, the Supreme Court in Hindustan Textiles case has considered all the three earlier Supreme Court Judgments and remanded the matter back to the authorities to reconsider the issue as per the direction given as to the enhancement of production capacity and recorded a finding to that effect, having regard to the addition made or replacement made to the machineries already available.
5. Having regard to the law now prevailing as declared by the Supreme Court in the above said cases, even in these cases, as there is no specific finding about the enduring nature of the assets or the increase in the production capacity, we are of the view that without answering the question of laws, the matter has to be remitted back to the assessing authority for redoing the exercise as per the dictum laid down by the Supreme Court in the aforesaid cases.
6. Hence the order of both the Assessing Officer and the Commissioner of Income Tax Appeals are set aside and the matter is remitted back to the Commissioner of Income Tax (Appeals) to reconsider the issue in the light of the direction given by the Supreme Court in the above said cases. As we are remitting back to the authorities, the question of law is not answered by us.
7. The above tax case appeals are disposed of accordingly. No costs.
rg To
1. The Commissioner of Income Tax Coimbatore
2. The Income Tax Appellate Tribunal, Chennai 'D' Bench, Chennai