TaxTMI 
TaxTMI 
2013 (11) TMI 1275
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....ness of Spinning Mills. The assessee incurred expenditure on replacement of machinery during the Asst. Years 2005-06 to 2008-09 and claimed the expenditure as revenue expenditure. The Assessing Officer treated the expenditure as capital expenditure. The assessee incurred a total expenditure of Rs.6,72,63,751/-, Rs.11,24,58,157/-, 3,38,16,942/-, and Rs.46,45,854/- respectively for the Asst. Years 2005-06, 2006-07, 2007-08, 2008- 09 towards replacement of various machinery viz., Elite Compact for Ring Frame, Uster Tensojet, Humidification Plants, Draw Frames, Autoconors, Veltex Cotton Contamination Cleaning Machine etc. The Commissioner of Income Tax (Appeals), following the decision of the Hon'ble Supreme Court in the case of Sri Mangyarkarasi Mills (P) Ltd. (315 ITR 114) held that the machinery replaced by the assessee is capital expenditure and not revenue expenditure. 4. At the time of hearing, the Departmental Representative submitted that the issue in appeal has already been decided in favour of Revenue by this Tribunal in assessee's own case for earlier Asst. Years. A copy of the order of this Tribunal is placed on record. We have gone through the order of the Co-ordinate B....
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....1216 to 1221 of 2008 of 2008, we passed orders as under: "3. The learned counsel representing the appellant as well as the respondent have stated that here also there was no specific finding as regards the enduring nature of the assets or the increase in the production capacity by virtue of the replacement of machinery parts. In the said circumstances, while setting aside the order of the Commissioner (Appeals) as well as that of the Tribunal, the matter is remitted back to the Commissioner of Income Tax (Appeals) to re-consider the issue in the light of the directions given by the Supreme Court in the above referred to Special Leave Petition as well as the Civil Appeal. The questions of law are not answered and are referred back to the Commissioner of Income Tax (Appeals). This tax case appeal stands disposed of. disposed of." 4. Following the same, while setting aside the order of the Commissioner (Appeals) as well as that of the Tribunal impugned in this appeal, the matter is remitted back to the Commissioner of Income Tax (Appeals) to re-consider the issue, in the light of the directions given by the Supreme Court in the a....
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....ollowed the directions of the Hon'ble jurisdictional High Court , particularly replacement of machinery gives enduring nature of the assets or increase in the production capacity. 6. On the other hand, the learned DR strongly relied on the decision of the Hon'ble Supreme Court in the case of CIT v. S. Mangayarkarasi Mills P. Ltd. (315 ITR 114) (SC) and also the decision of the Hon'ble jurisdictional High Court in the case of CIT v. Madura Coats (2012) 205 Taxman 357 (Mad). The learned DR further submitted that similar issue was considered by the very same Bench of the Tribunal, where both of us are parties in ITA No. 754/Mds/2012 dated 12-09-2012. 7. We have heard both the sides, perused the records and gone through the orders of the authorities below. The only issue for consideration before us is whether the expenditure incurred by the assessee for the purpose of replacement of Ring Frames is revenue expenditure or capital expenditure. The learned CIT(Appeals) as per the directions of the Hon'ble jurisdictional High Court by following the decisions of the Hon'ble Supreme Court in the case of CIT v. Ramaraju Surgical Cotton Mills Ltd. (294 ITR 328....
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....bove, following the same, the substantial question of law 1 and 2 raised in this tax case appeal are answered against the assessee and in favour of the revenue. 13. With regard to the third substantial question of law, it is submitted by the learned counsel for the appellant that when each of the machinery in question such as Ring Frames, Draw Frames and Speed Frame is purchased for the first time, then it is a capital asset, on which depreciation should be granted. Whereas, it is submitted that the sale of a worn out machinery and replacement thereof by new machinery can only be treated as reduction and addition to the block of assets, which is a part of replacement. It is also submitted that while under the law, as it stood prior to 1988-89, the fact of treating the entire mill as an integrated unit may have had the effect of treating the replacement of machinery as replacement of parts of a larger whole and thus treated as revenue expenditure and once the concept of block of assets has been brought in by the Parliament from the assessment year 1988-89, whether the mill is an integrated whole or not, whether the repl....
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....e Act. For that proposition, he relied on the decision of the Himachal Pradesh High Court in Income-tax Appeal No. 76 of 2006 dated 19-09-2012 in the case of CIT v. M/s. Ruchira Papers Ltd. 14. The learned DR supported the order passed by the Assessing Officer. He further submitted that the Assessing Officer has charged the said interest in the assessment order itself and therefore the case law relied on by the learned counsel for the assessee has no application. 15. We have heard both the sides, perused the records and gone through the orders of the authorities below. In this case in the assessment order itself at page No.10 the Assessing Officer has charged the interest under section 234B of the Act. Therefore we find that the decision relied on by the learned counsel for the assessee has no application. As per the decision of the Hon'ble Supreme Court in the case of CIT v. Anujm M.H. Ghaswala And Others (252 ITR 1) (SC) , charging of interest under section 234B of the Act is mandatory. Respectfully following the decision of the Hon'ble Supreme Court in the aforesaid case, this additional ground raised by the assessee in respect of levy of inter....