TaxTMI 
TaxTMI 
2018 (12) TMI 1270
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....question of law : "Whether, in the facts and circumstances of the case, the Tribunal was right in holding that the claim of modernization/expenditure incurred amounting to Rs. 2,58,21,005/- is allowable as revenue expenditure?" 3. Heard Mr.T.R.Senthil Kumar, learned Senior Standing Counsel for the Revenue and Mr.R.Sivaraman, learned counsel for the assessee. 4. The short question which falls for consideration is as to whether the expenditure incurred by the assessee on replacement of old machinery by purchase and installation of new machinery, replacement of spares of textile machinery be allowable as a Revenue expenditure. The law has been settled by the Hon'ble Supreme Court in the case of CIT, Madurai & others Vs. Saravana Spinni....
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.... accepted the findings recorded by the Tribunal saying that by the introduction of Casablanca Conversion System no new machinery or plant was installed, but the introduction of the system amounted to fitting of improved version and the expenditure in that behalf was of revenue nature. The High Court observed that certain parts of the machinery had worn-out, they needed replacement, and when it was found that the old type of replacement parts were not available in the market, the assessee had to introduce the Casablanca Conversion System. This finding was accepted by this Court in the above judgement. In our view, the said judgement has no application with the facts of the present case. At the outset, we may state that replacement generally ....
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....atisfactorily answered by the recent decision of tis Court in CIT v. Saravana Spinning Mills (P) Ltd., MANU/SC/3308/2007. In that case this Court has held unambiguously that each machine in a segment of a textile mill has an independent role to play in the mill and the output of each division is different from the other. "Dealing wit a ring frame in a textile mill, this Court has held that it is an "Independent and separate" machine. Further, it is accepted that each machine in a textile mill is part of the integrated process of manufacture of yarn and is integrally connected to the other machines in the mill for production of the final product. However, this interconnection does not take away the independent identity an distinct function o....