TaxTMI 
TaxTMI 
2014 (1) TMI 589
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....Tribunal. The common question involved in both the appeals is: whether the expenditure incurred by the assessee towards replacement of machinery is revenue expenditure or capital expenditure? The other grounds raised by the assessee in the appeals relate to levy of interest under section 220(2) and interest under section 234 B & 234C of the Income Tax Act, 1961 (in short 'the Act') 3. In the first round of litigation, the issue regarding expenditure incurred on replacement of machinery travelled upto the Hon'ble jurisdictional High Court. The assessee had claimed expenditure on replacement of textile machinery as revenue expenditure under the provisions of Sec.37 of the Act. The CIT(A) allowed the claim of the assessee. In appeal, the Trib....
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....e expenditure incurred on replacement of machinery is capital in nature. The relevant extract of the order of the Tribunal is reproduced as under:- "We are of the considered opinion that, in the present case the assessee has incurred expenditure for the efficient working of the existing machinery. The expenditure incurred on replacement of parts of the existing machinery in order to make the machinery work more efficiently has to be capitalized. The assessee is entitled to claim depreciation on the same in accordance with the provisions of the Act. Our view is further fortified by the judgement of the Hon'ble jurisdictional High Court in the case of Madura Coats (supra) wherein it has been held as under:- &n....
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....ounsel for the appellant, we hold that the third question of law is also answered in favour of the revenue and against the assessee." In the instant case, a perusal of the order of CIT(A) shows that machinery has been replaced by the assessee to bring latest technology and for improving the efficiency of the plant and machinery. The replacement of machinery has resulted in increase in productivity as well as profits. The Hon'ble Supreme Court of India in the case of CIT Vs. M/s. Mangayarkarasi Mills P.Ltd., reported as 315 ITR 114(SC) has held expenditure incurred on replacement of machinery as capital expenditure. The Hon'ble Apex Court further held that such expenditure is not allowable as revenue expenditure under the provisions of Sec.....
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....e case of CIT Vs. Suresh Gokuldas (supra). 14. A perusal of the aforesaid judgement would show that the Hon'ble High Court has held that the assessee was asked to pay interest under section 220(2) of the Act by demand notice issued under section 156. Notice of demand issued under section 156 cannot be considered to be an order. Therefore, if any mistake has occurred therein, it can be corrected by an administrative order. Any order passed by Income Tax Officer under section 154 for rectifying any mistake in the original demand notice under section 154 is non-est in the eye of law. Therefore, no appellate proceedings lie against such order. The ratio laid down by the Hon'ble Madras High Court in the case of Suresh Gokuldas (sup....
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.... to be taken into consideration from the date of passing of the fresh assessment order. The assessee is liable to pay demand within thirty days from the service of the demand notice in pursuance of the assessment order dated 21.12.2011. If the assessee fails to pay the amount demanded within the period specified under section 220(1), the assessee is liable to pay interest u/s.220(2) of the Act. On this issue, we do not agree with the findings of CIT(A). Our view is further fortified by the Hon'ble Bombay High Court in the case of CIT Vs. Chika Overseas (P) Ltd. (supra) and the judgement of the Hon'ble Supreme Court of India in the case of Vikrant Tyres Ltd. (supra). In view of our above finding, this ground of appeal of the assessee is allo....