Commissioner Of Income-Tax-I Chennai v. M/S.indira Cotton Mills Limited Jagampet Gardens Chrompet Chennai – 600 044

IN THE HIGH COURT OF JUDICATURE AT MADRAS CORAM : THE HONOURABLE MR.JUSTICE K.RAVIRAJA PANDIANANDTHE HONOURABLE MR.JUSTICE M.M.SUNDRESH Tax Case (Appeal) No.559 of 2004 Commissioner of Income-tax-IChennai ..Appellant Vs. M/s.Indira Cotton Mills LimitedJagampet GardensChrompetChennai – 600 044. ..Respondent Appeal filed under Section 260-A of the Income Tax Act againstthe order of the Income Tax Appellate Tribunal, Madras 'B' Bench,dated 28.1.2004 passed in I.T.A.No.16/Nds/97 against the order of theCommissioner of Income Tax (Appeals) VII, Madras - 34 made inIT.Appeal No.46/96-97 dated 17.09.1996 and G.I.No./PA.No.47-003-CX-0486 Assessment Year 1993-94 against the order of the DeputyCommissioner of Income Tax Special Range II, Madras-34 made inPAN/GIR.No.10I date of order 21.3.1996. For Appellant : Mr.J.Naresh KumarFor Respondent : Mr.S.Sridhar JUDGMENT (Judgment of the Court was delivered by K.RAVIRAJA PANDIAN,J.) The revenue has come up on appeal against the order ofthe Income Tax Appellate Tribunal, Madras 'A' Bench, dated28.1.2004passedinI.T.A.No.16/Mds/1997 in respect of the assessment year 1993 - 94 byformulating the following substantial questions of law: "(1). Whether in the facts and circumstances of thecase, the Tribunal was right in allowing a deduction of theamounts spent on new machinery as revenue expenditure? https://hcservices.ecourts.gov.in/hcservices/ 2. Whether in the facts and circumstances of the case,the Tribunal was right in allowing a deduction of theamounts spent on replacement of machinery as currentrepairs? 3. Whether in the facts and circumstances of the case,replacement of independent complete machinery can betreated as revenue expenditure? 4. Whether in the facts and circumstances of the casethe tribunal is right in holding that the deduction underSection 80I had to be computed by allocating theexpenditure based on the spindlage and not on turnoverpertaining the mill B?" 2. The facts of the case are as follows: The assessee company is a textile mill. For the assessment year1993-94, the assessee filed its return and the assessing officerinter alia disallowed the claim of the assessee in respect ofreplacement expenditure of autoconer etc. The assessing officer hasfound that the claim of the assessee that it had sold the oldmachinery and brought a new one was found to be false. AssessingOfficer held that the purchase of new machinery cannot be treated asa revenue expenditure. Since the assessee had two mills, theassessing officer recomputed the deduction under Section 80I for themill B by reducing the expenditure proportionate to mill B's turnover(incurred towards Administration, employees, interest donation etc.,)from the profit. Aggrieved by the disallowances in the assessmentorder, the assessee filed an appeal before the CIT (Appeals). The CIT(Appeals) allowed the appeal holding that the claim of the assesseefor treating such huge expenditure year after year as revenueexpenditure can be allowed. The CIT (A) also directed the assessingofficer to allow the deduction under Section 80I allocating theexpenditure based in the number of spindles and not based on theturnover. Aggrieved by the order of the CIT (A), the revenue filed anappeal before the Income-tax Appellate Tribunal and the Tribunaldismissed the appeal holding that the expenditure incurred is withrespect to replacement and the same is revenue expenditure. TheTribunal also upheld the decision of the CIT(A) with respect to thecomputation of the deduction under Section 80I. Aggrieved by theorder of the Income-tax Appellate Tribunal, the present appeal isfiled by the revenue. 3. It is submitted by the learned counsel on either side thatthe first three questions of law are covered by the decisions of theSupreme Court in the case of COMMISSIONER OF INCOME-TAX VS. RAMARAJUSURGICAL COTTON MILLS reported in (2007) 294 ITR 328 and COMMISSIONEROF INCOME-TAX VS. SARAVANA SPINNING MILLS PRIVATE LIMITED reported in(2007) 293 ITR 201. Learned counsel for the assessee also produced the latest judgment of the Supreme Court in Civil Appeal No.7297 of2009 arising out of S.L.P.(C) No.2037 of 2009, dated 3.11.2009 inthe case of COMMISSIONER OF INCOME TAX VS. M/S.HINDUSTAN TEXTILES,wherein also after referring to the judgment of COMMISSIONER OFINCOME-TAX VS. SRI MANGAYARKARASI MILLS PRIVATE LIMITED reported in(2009) 315 I.T.R. 114, remitted the matter back to the High Court forconsideration by following dictum laid down by the Supreme Court inthe case of COMMISSIONER OF INCOME-TAX VS. RAMARAJU SURGICAL COTTONMILLS reported in (2007) 294 ITR 328 and COMMISSIONER OF INCOME-TAXVS. SARAVANA SPINNING MILLS PRIVATE LIMITED reported in (2007) 293ITR 201. 4. In the light of the order passed by the Supreme Court in theabove said decision, in respect of the three questions of law, theorder of the Tribunal is set aside and the matter is remitted back tothe Commissioner of Income-tax (Appeals) to re-consider the issue asdirected by the Supreme Court in the above said judgment. As regardsthe 4[th] question of law, it is seen that the issue has been remittedback to the authorities to consider the issue afresh and when thatbeing the position, from the order of the Tribunal, the said questionof law does not arise for consideration. Hence, the said question oflaw is not answered. The tax case appeal is disposed of in the above terms. Sd/Asst.Registrar/true copy/Sub Asst.RegistraruskTo1. The Assistant Registrar Income Tax Appellate Tribunal Rajaji Bhavan, Besant Nagar, Madras-90. 2. The Commissioner of Income Tax (Appeals)-VII Chennai. 3. The Commissioner of Income Tax -I, Chennai-34.4. The Dy.Commissioner of Income-tax Special Range-II, Madras-34. AKR (CO)GSK 31.12.2009. T.C.(A).No.559 of 2004