Heard The Counsel. In Respect Of Question v. Https://Hcservices.ecourts

In the High Court of Judicature at Madras The Honourable Mr. JUSTICE R.BALASUBRAMANIANand The Honourable Mr. JUSTICE P.P.S.JANARTHANA RAJA Tax Case (Appeal) No.26 of 2004 Commissioner of Income TaxMadurai..... Appellant APPEAL under Section 260A of the Income Tax Act against the orderdated 08.01.2003 made in I.T.A.No.3165/Mds/93 on the file of theIncome Tax Appellate Tribunal Chennai 'C' Bench for the assessmentyear 1990-91 against the order of the Commissioner of Income Tax(Appeals), Madurai dated 21.10.93 ITA No. 224/93-94 against the orderof the Asst. Commissioner of Income Tax, Central Circle, Maduraidated 22/3/93 in PAN/GIR 47-016-CO-3948. For Respondent : No appearance This appeal is filed by the Revenue under Section 260A of theIncome Tax Act against the order of the Income-tax Appellate Tribunaldated 08.01.2003 made in I.T.A.No.3165/Mds/93. On 27.01.2004, thisCourt admitted the appeal and formulated the following substantialquestions of law: "1. Whether in the facts and circumstances ofthe case, the Tribunal was right in allowing adeduction of the amounts spent on replacement ofmachinery? 2. Whether in the facts and circumstances ofthe case, the Tribunal was right in holding that theassessee has adopted the proper valuation of closingstock of the cotton?" https://hcservices.ecourts.gov.in/hcservices/ 2. The brief facts arising out of the above tax case are asunder: The assessee is a textile mill incorporated under the CompaniesAct. It is engaged in the manufacture of yarn. The relevantassessment year is 1990-91 and the corresponding accounting year endedon 31.03.1990. The assessee filed Return of income on 31.12.1990admitting a total income of Rs.69,75,576/-. The said Return wasprocessed under Section 143(1)(a) of the Act and determined the incomeat Rs.86,64,870/-. Subsequently, the assessment was completeddetermining a total income of Rs.1,22,76,990/-While computing theassessment, the Assessing Officer disallowed the replacement of oldmachinery by new machinery, as capital expenditure and also was of theview that the assessee had undervalued the closing stock of cotton andhence made an addition of Rs.15,22,236/-. Aggrieved by the order, theassessee filed an appeal before the Commissioner of Income Tax(Appeals). The Commissioner of Income Tax (Appeals) deleted theaddition and allowed the appeal. Aggrieved, the Revenue filed anappeal before the Income Tax Appellate Tribunal (hereinafter referredto as the "Tribunal"). The Tribunal dismissed the appeal confirmingthe order the Commissioner of Income Tax (Appeals). 3. Learned standing counsel appearing for the Revenue submittedthat the replacement of plant and machinery is only capitalexpenditure and further submitted that the assessee has undervaluedthe cotton stock and hence the Tribunal is wrong in holding that theassessee's valuation of the closing stock of the cotton is correctIt is further submitted that the assessee has not complied with theprinciples of adopting lesser value among the cost or market price. 4.Inspite of notice served on the respondent, there was norepresentation on behalf of the respondent. 3. Learned standing counsel appearing for the Revenue submittedthat the replacement of plant and machinery is only capitalexpenditure and further submitted that the assessee has undervaluedthe cotton stock and hence the Tribunal is wrong in holding that theassessee's valuation of the closing stock of the cotton is correctIt is further submitted that the assessee has not complied with theprinciples of adopting lesser value among the cost or market price. 4.Inspite of notice served on the respondent, there was norepresentation on behalf of the respondent. 5.Heard the counsel. In respect of Question No.1, the issuestands covered in favour of the assessee by this Court judgmentreported in 275 ITR 403 in the case of Commissioner of Income-tax VsJanakiram Mills Ltd. and hence we answer the question in favour of theassessee and against the Revenue. In respect of Question No.2, theassessee has valued the lowest value of the various categories of rawcotton as on the last date of the accounting year and increased it bythe freight expenses and the resultant figure was adopted as themarket rate for valuing the closing stock of cotton. Both the C.I.T(A) as well as the Tribunal found that the Assessing Officer could notpoint out any cogent evidence to show that the market value shown bythe assessee for various categories of cotton is lower than the marketrate. After appreciation of the materials and evidence on record,both the authorities had given a concurrent finding that the assesseehas shown the correct market value in respect of the variouscategories of cotton. Hence, we find no error or infirmity in theorder of the Tribunal and the same does not require interference Under the circumstances, we answer the second question also in favourof the assessee and against the Revenue. 6.With the above observation, the tax case is disposed of. Nocosts.sl/kmSd/Asst.Registrar /true copy/Sub Asst.RegistrarTo1. THE ASSISTANT REGISTRARINCOME-TAX APPELLATE TRIBUNALRAJAJI BHAVAN, MADRAS C BENCHBESANT NAGAR, CHENNAI-600 090.2. THE COMMISSIONER OF INCOME TAX(A)I, MADURAI.3. THE ASST. COMMISSIONR OF INCOME TAX,CENTRAL CIRCLE, MADURAI4. THE COMMISSIONER OF INCOME TAXMADURAIONE CC TO MR.PUSHYA SITARAMAN, SENIOR STANDING COUNSEL FOR IT(SR 47113)T.C.(A) No.26 of 2004TEJ(CO)BP/3.11 09.10.2006