The Commissioner Of Income Tax Madurai v. M/S Raju Spinning Mills Ltd 1110-B Cotton Market Rajapalayam 626 117

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 23.04.2009 CORAM: THE HONOURABLE MR.JUSTICE K.RAVIRAJA PANDIANANDTHE HONOURABLE MR.JUSTICE M.M.SUNDRESH Tax Case(Appeal) Nos.743 and 744 of 2008 The Commissioner of Income TaxMadurai .. Appellant /Appellant -vs- M/s Raju Spinning Mills Ltd1110-B Cotton MarketRajapalayam 626 117. .. Respondent /Respondent TAX CASES filed under Section 260 A of the Income Tax Act, 1961against the order of the Income Tax Appellate Tribunal, MADRAS 'C'Bench, Chennai dated 17.06.2005 passed in ITA.Nos.276 and587/Mds/2000 against the order of the Commissioner of Income Tax (A),Madurai in ITA No.264/97-98, dt. 16.11.99 for the assessment year1995-96 and ITA No.165/1999-2000 dt.2.12.99 for the assessment year1996-97 and against the order of the Deputy Commissioner of IncomeTax, Special Range-I, Madurai in PAN/GIR No.CN-D246,dt. 26.9.97 forthe assessment year 1995-96 and against the order of the JointCommissioner of Income-Tax, Tirunelveli Range, Tirunelveli in PANo./GIR No.49-003-CN-D246 dt. 30.3.99 for the assessment year 1996-97. The revenue on appeal against the order of the Income TaxAppellate Tribunal MADRAS 'C' Bench, Chennai dated 17.06.2005 passedin ITA.Nos.276/587/Mds/2000 by formulating the following questions oflaw. "1. Whether in the facts and circumstanceshttps://hcservices.ecourts.gov.in/hcservices/of the case, the Tribunal was right in allowing adeduction of the amounts spent n replacement ofmachinery as revenue expenditure? 2. Whether in the facts and circumstances ofthe case, replacement of independent completemachinery can be treated as revenue expenditure?3. Whether in the facts and circumstances ofthe case, the Tribunal was right in deciding theissue without going into the concept of Block ofasset?". 2. It is submitted across the bar by the counsel appearing oneither side that the above questions of law, are covered by thedecision of the Supreme Court in the case of Commissioner of IncomeTax vs.Ramaraju Surgical Cotton Mills reported in 294 ITR 328,wherein the Judgment of this Court in Commissioner of Income Tax(Appeals) vs. Janakiram Mills Limited reported in 275 ITR 430 wasconsidered by the Supreme Court with reference to the contention ofthe assessee that replacement of assets without increasing theproduction capacity would amount to revenue expenditure. The SupremeCourt remanded the matter by observing that there are a number oftests which are required to be considered while deciding whether theexpenditure was revenue or capital in nature. In the absence of therequisite details regarding the production capacity remainingconstant even after replacement, the matter could not be decided onmerits and require to be remitted back to the Commissioner (Appeals)for consideration of that particular issue with reference to theproduction capacity. In this case also, there is no materialavailable as to the increase or otherwise of the production capacityin replacement of the machineries. Without the factual details, thequestions of law cannot be decided. Hence this case also require tobe remitted back to the Commissioner of Appeals as done by theSupreme Court in the aforesaid decision. 3. Hence, the order of the Tribunal is set aside and thematter is remitted back to the Commissioner of Appeals to redo theexercise as directed by the Supreme Court in the case of Commissionerof Income Tax vs.Ramaraju Surgical Cotton Mills reported in 294 ITR328. With the above observations, the appeals are disposed of. Nocosts. Sd/Asst.Registrar/true copy/ Sub Asst.Registrar rg https://hcservices.ecourts.gov.in/hcservices/ To 1. Commissioner of Income Tax, Madurai. 2. The Asst. Registrar,Income Tax Appellate Tribunal, "C" Bench, Rajaji Bhavan,Besant Nagar,Chennai-90. 3.The Joint Commissioner of Income Tax,Tirunelveli Range,Tirunelveli. 3. Hence, the order of the Tribunal is set aside and thematter is remitted back to the Commissioner of Appeals to redo theexercise as directed by the Supreme Court in the case of Commissionerof Income Tax vs.Ramaraju Surgical Cotton Mills reported in 294 ITR328. With the above observations, the appeals are disposed of. Nocosts. Sd/Asst.Registrar/true copy/ Sub Asst.Registrar rg https://hcservices.ecourts.gov.in/hcservices/ To 1. Commissioner of Income Tax, Madurai. 2. The Asst. Registrar,Income Tax Appellate Tribunal, "C" Bench, Rajaji Bhavan,Besant Nagar,Chennai-90. 3.The Joint Commissioner of Income Tax,Tirunelveli Range,Tirunelveli. 4.The Deputy Commissioner of Income-Tax,Special Range-I, Madurai.5.The Commissioner of Income Tax (Appeals)Madurai.+1cc to M/s.Pushya Sitaraman, Advocate Sr 16956VSV(CO)km/7.5. T.C.A.Nos.743 and 744 of 2008