AI Drafter 
TaxTMI 
TaxTMI 
2012 (11) TMI 1092
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....-99 the assessee declared the total income at Rs. 2,85,77,710 under sec. 115JA of the Income Tax Act, 1961 ('the Act' for short). The returns were processed under section 143(1) of the Act. Thereafter the taxable income was determined at Rs. 3,36,836/- for the assessment year 1993-94, at Rs. 7,92,03,840/- for the assessment year 1994-95 and at Rs. 4,26,18,650/- for the assessment year 1998-99. Subsequently, the Assessing Officer by issuing a notice u/s 148 of the Act reassessment proceedings were initiated u/s 147 read with section 143(3) of the Act and he disallowed the expenditure incurred on replacement of machinery. 3. The assessee carried the matter in appeal before the CIT(Appeals). The learned CIT(Appeals) confirmed the disallowance made by the Assessing Officer in respect of the expenditure incurred on replacement of machinery. Being aggrieved, the assessee carried the matter before the Tribunal. The Tribunal by common order dated 26-07-2005 in ITA No. 186/Mds/2001 allowed the ground raised by the assessee and held that the expenditure incurred on replacement of machinery is revenue expenditure. The Revenue carried the matter before the Hon'ble jurisdictional Hig....
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....preme Court in the case of Ramaraju Surgical Cotton Mills & Ors regarding the tests for determining the nature of expenditure and the allowability u/s 37 are also answered by the judgement in the case of Sri Mangyarkarasi Mills )P. Ltd. In the case of Commissioner of Income-tax v. Sarvaraya Textiles Ltd. (2011) 332 ITR 553 (AP), it was held "The entire textile machinery cannot be regarded as a single asset, replacement of parts which can be considered to be for the mere purpose of preserving or maintaining this asset. All machines put together constitute the production process and each separate machine is an independent entity. Replacement of an old machine with a new one would constitute the bringing into existence of a new asset in the place of the old one, and not repair of the old and existing machine. A new asset in a textile mill gives the purchaser an enduring benefit of better and more efficient production over a period of time. The expenditure incurred was to bring a new asset into existence with a view to obtain a new advantage and not an expenditure incurred to preserve and maintain an already existing asset. The expenditure was capital in nature." The facts of the appel....
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....s High Courts and the Hon'ble Supreme Court including the decision in the case of CIT v. Ramaraju Surgical Cotton Mills Ltd. (supra) and by following the decision in the case of CIT v. Mangarkarasi Mills Ltd. (supra) has held that replacement of Draw Frame is a capital expenditure. For that proposition the Hon'ble Supreme Court has relied on the decisions in the case of Travancore Cochin Chemicals Ltd. v. CIT (106 ITR 900) (SC) and Lakshmiji Sugar Mills P. Co. v. CIT AIR 1972 SC 159 and observed that "it has been held by this court that bringing into existence a new asset or an enduring benefit for the assessee amounts to capital expenditure. We have already explained why replacement, in this case, amounts to bringing into existence a new asset and also an enduring benefit for the assessee It is clear then that the expenditure of the assessee here is not of a revenue nature and thus, cannot be claimed as a deduction under section 37 of the Act.". 6. The Hon'ble jurisdictional High Court in the case of CIT, Madurai v. Madura Coats (2012) 205 Taxman 357 (Madras) has observed as under : "11. When the tax case appeals came up for consideration it is submitted by the learn....
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....the assessee is dismissed." 8. Respectfully following the above decision of the co-ordinate Bench of this Tribunal and also the decisions of the Hon'ble Supreme Court as well as the Hon'ble jurisdictional High Court, this ground of appeal raised by the assessee is dismissed. 9. In all these appeals two additional grounds have also been raised which read as under: Charge of interest u/s 220(2): 1. The learned Assessing Officer has erred in levying interest u/s 220(2) without creating a charge in respect of interest u's 220(2) in the impugned assessment order. 2. The learned Assessing Officer has erred in levying interest u/s 220(2) from the elapsing of 30 days from the date of original assessment order when in fact interest u/s 220(2) is governed by circular No.334 (F. No. 400/3/81-ITCC), dated 3-4-1982, which mandates that interest u/s 220(2) can be levied only from the elapsing of 30 days from the date of the notice of demand u/s 156 issued as a consequence of the fresh assessment order being passed. Charge of Interest U/s 234B: 3. The learned Assessing Officer has erred in levying interest u/s 234B without creating a charge in the impugned assessment orde....