Sri Vasudeva Textiles Limited, Coimbatore V. JCIT, Coimbatore

ITA 1689/CHNY/2000

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 7843 (ITAT-CHENNAI)
• Duration Of Justice: 15 year(s) 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-03-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 04-01-2016
• Assessment Year: 1995-1996
• Appeal Filed On: 03-11-2000
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N MADHAVAN
• Assessee Lawyers: T BANUSEKAR
• Keywords: Capital asset; Depreciation; Difference of opinion; Change of opinion; Revenue expenditure; Capital expenditure
• Section: 143(3); 147; 148; 10

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI . . . , . !'# ! , % !& BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ ITA NO. 1689/MDS/2000 ( )( / ASSESSMENT YEAR : 1995-96 M/S SRI VASUDEVA TEXTILES LIMITED, 2/167, ELLAPPALAYAM POST, POGALUR, ANNUR VIA COIMBATORE 641 697. PAN : CQ - 9240 V. THE JOINT COMMISSIONER OF INCOME TAX, SPECIAL RANGE I, COIMBATORE 18. (+,/ APPELLANT) (-.+,/ RESPONDENT) +, / 0 / APPELLANT BY : SH. T. BANUSEKAR, CA -.+, / 0 / RESPONDENT BY : SH. N. MADHAVAN, JCIT 1 / 2% / DATE OF HEARING : 04.01.2016 3') / 2% / DATE OF PRONOUNCEMENT : 04.03.2016 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS), COIMBATOR E, DATED 31.08.2000 AND PERTAINS TO ASSESSMENT YEAR 1995-96. 2. IN FACT, THIS APPEAL WAS DISPOSED OF BY AN ORDER DATED 26.09.2005 HOLDING THAT THE NOTICE ISSUED FOR REOPE NING THE 2 I.T.A. NO.1689/MDS/2000 ASSESSMENT IS BARRED BY LIMITATION. HOWEVER, THE R EVENUE FILED AN APPEAL BEFORE THE HIGH COURT AND THE ORDER OF THE T RIBUNAL WAS SET ASIDE AND THE ISSUE WAS REMITTED BACK TO THE FILE O F THE TRIBUNAL WITH A DIRECTION TO DECIDE THE SAME IN RESPECT OF JURISD ICTION AND ON MERIT IN ACCORDANCE WITH LAW. IN FACT, THE HIGH COURT DI RECTED THE TRIBUNAL AS FOLLOWS:- ..WE SET ASIDE THE ORDER OF THE INCOME TAX APPELLATE TRIBUNAL AND REMAND THE MATTER BACK TO TH E INCOME TAX APPELLATE TRIBUNAL, WITH A DIRECTION TO D ECIDE THE ISSUE IN RESPECT OF JURISDICTION, ESPECIALLY WH ETHER THE ASSESSING OFFICER IS JUSTIFIED IN RE-OPENING TH E ASSESSMENT UNDER SECTION 147 OF THE ACT AND ALSO ON T HE MERITS OF THE CASE IN ACCORDANCE WITH LAW, AS EXPEDITIOUSLY AS POSSIBLE, AFTER GIVING OPPORTUNITY TO THE PARTIES 3. IN VIEW OF THE ABOVE DIRECTION OF THE HIGH COURT , THE MATTER WAS TAKEN UP FOR FINAL DISPOSAL. 4. SH. T. BANUSEKAR, THE LD. REPRESENTATIVE FOR THE ASSESSEE, SUBMITTED THAT THE FIRST ISSUE ARISES FOR CONSIDERA TION IS WITH REGARD TO JURISDICTION TO REOPEN THE ASSESSMENT UNDER SECT ION 147 OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT'). ACCORDI NG TO THE LD. REPRESENTATIVE, THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE ACT INITIALLY ON 22.05.1996 DETERMINI NG LOSS OF ` 6,83,436/-. THE ASSESSING OFFICER REOPENED THE ASS ESSMENT BY 3 I.T.A. NO.1689/MDS/2000 ISSUING NOTICE UNDER SECTION 148 OF THE ACT. ACCOR DING TO THE LD. REPRESENTATIVE, THE ASSESSING OFFICER OUGHT TO HAVE ISSUED NOTICE UNDER SECTION 143(2) OF THE ACT BEFORE EXPIRY OF TW ELVE MONTHS FROM THE END OF THE MONTH IN WHICH THE RETURN WAS FILED. IN THIS CASE, 143(2) NOTICE WAS NOT ISSUED WITHIN TWELVE MONTHS. THEREFORE, THE TRIBUNAL IN THE EARLIER OCCASION FOUND THAT THE NOT ICE ISSUED BY THE ASSESSING OFFICER IS BARRED BY LIMITATION. HOWEVER , THE HIGH COURT REVISED THE FINDING OF THE TRIBUNAL AND THE MATTER WAS REMITTED BACK TO THE FILE OF THE TRIBUNAL FOR CONSIDERING THE JUR ISDICTION OF THE ASSESSING OFFICER IN REOPENING THE ASSESSMENT UNDER SECTION 147 OF THE ACT. ACCORDING TO THE LD. REPRESENTATIVE, I N THE ORIGINAL ASSESSMENT, THE ASSESSING OFFICER CONSIDERED THE IS SUE OF DEPRECIATION ON THE WINDMILL AND THE COST OF REPLAC EMENT OF MACHINERY. THEREFORE, ACCORDING TO THE LD. REPRESE NTATIVE, THE REOPENING OF THE ASSESSMENT IS DUE TO CHANGE OF OPI NION. HENCE, THE ASSESSING OFFICER HAS NO JURISDICTION TO REOPEN THE ASSESSMENT UNDER SECTION 147 OF THE ACT. 5. ON THE CONTRARY, SHRI N. MADHAVAN, THE LD. DEPAR TMENTAL REPRESENTATIVE, SUBMITTED THAT IT IS NOT A CASE OF CHANGE OF OPINION. ACCORDING TO THE LD. D.R., THE GROUNDS RAISED BEFOR E THE TRIBUNAL IS 4 I.T.A. NO.1689/MDS/2000 ONLY IN RESPECT OF LIMITATION IN ISSUING NOTICE UND ER SECTION 143(2) OF THE ACT. ACCORDING TO THE LD. D.R., THE ASSESSEE I S NOT ENTITLED TO CLAIM THE EXPENDITURE ON REPLACING THE MACHINERY AS REVENUE EXPENDITURE. THE ASSESSEE HAS ALSO CLAIMED EXCESSI VE DEPRECIATION, THEREFORE, THE ASSESSING OFFICER HAS RIGHTLY FOUND THAT THE INCOME OTHERWISE TAXABLE UNDER THE SCHEME OF TH E INCOME-TAX ACT ESCAPED ASSESSMENT. THEREFORE, THE ASSESSING O FFICER HAS RIGHTLY REOPENED THE ASSESSMENT. THE LD. D.R. FURT HER SUBMITTED THAT IT IS NOT A CASE OF CHANGE OF OPINION. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE ASSESSEE HAS RAISED GROUNDS WITH REGARD TO REOPENING OF ASSE SSMENT ON THE GROUND THAT THE ASSESSING OFFICER ERRONEOUSLY ASSUM ED JURISDICTION DUE TO CHANGE OF OPINION. THE ASSESSEE HAS ALSO RA ISED GROUNDS WITH REGARD TO LIMITATION IN ISSUING NOTICE UNDER S ECTION 143(2) OF THE ACT. ON THE EARLIER OCCASION, THIS TRIBUNAL FOUND THAT THE ISSUE OF NOTICE UNDER SECTION 143(2) IS BARRED BY LIMITATION . HOWEVER, THE HIGH COURT HAS SET ASIDE THE ORDER OF THIS TRIBUNAL WITH A DIRECTION TO DISPOSE OF THE APPEAL AFTER CONSIDERING THE JURISDI CTION OF THE ASSESSING OFFICER TO REOPEN THE ASSESSMENT AND THE APPEAL ON 5 I.T.A. NO.1689/MDS/2000 MERIT. THEREFORE, WHAT MAINLY IS TO BE DECIDED IS ONLY JURISDICTION OF ASSESSING OFFICER TO REOPEN THE ASSESSMENT. IN OTH ER WORDS, WHETHER THE REOPENING OF THE ASSESSMENT UNDER SECTI ON 147 OF THE ACT IS DUE TO CHANGE OF OPINION OR NOT. WE HAVE CA REFULLY GONE THROUGH THE ORIGINAL ASSESSMENT ORDER DATED 22.05.1 996, A COPY OF WHICH IS AVAILABLE AT PAGE 62 OF THE PAPER-BOOK. I N THE ASSESSMENT ORDER, IN FACT, THE ASSESSING OFFICER CONSIDERED TH E WINDMILL SUBSIDY AND FOUND THAT THE WINDMILL SUBSIDY IS A CAPITAL RE SERVE. HOWEVER, THE ASSESSING OFFICER WRONGLY TREATED THE SAME IN T HE COMPUTATION STATEMENT. THE ASSESSING OFFICER FOUND THAT THE SU BSIDY WAS GIVEN BY THE STATE GOVERNMENT TO PROMOTE INDUSTRIES, THER EFORE, IT DOES NOT FORM PART OF TOTAL INCOME. WITH REGARD TO VALU E OF MACHINERY REPLACED, WITHOUT ANY DISCUSSION THE ASSESSING OFFI CER ALLOWED THE VALUE OF THE MACHINERY REPLACED AS REVENUE EXPENDIT URE. THEREFORE, IT IS OBVIOUS THAT THE ASSESSING OFFICER WITHOUT EXAMINING THE NATURE OF EXPENDITURE INCURRED AND THE NATURE O F THE MACHINERY REPLACED, HAS SIMPLY ACCEPTED THE CLAIM OF THE ASSE SSEE WITH REGARD TO COST OF THE MACHINERY REPLACED. THIS TRI BUNAL IS OF THE CONSIDERED OPINION THAT THE ASSESSING OFFICER IS EX PECTED TO EXAMINE THE NATURE OF MACHINERY REPLACED BY THE ASS ESSEE AND THEREAFTER IT HAS TO BE DECIDED WHETHER WHAT WAS IN CURRED BY THE 6 I.T.A. NO.1689/MDS/2000 ASSESSEE IS CAPITAL EXPENDITURE OR REVENUE EXPENDIT URE. SINCE SUCH AN EXERCISE WAS NOT DONE IN THE ORIGINAL ASSESSMENT BY THE ASSESSING OFFICER, THIS TRIBUNAL IS OF THE CONSIDER ED OPINION THAT THERE IS NO QUESTION OF CHANGE OF OPINION AS FAR AS THE COST OF MACHINERY REPLACED. IN OTHER WORDS, THE ASSESSING OFFICER HAS NOT TAKEN ANY VIEW OTHER THAN ALLOWING THE CLAIM OF THE ASSESSEE BY SIMPLY MAKING THE REFERENCE. THEREFORE, THIS REFER ENCE IN THE ASSESSMENT ORDER WITH REGARD TO VALUE OF MACHINERY CANNOT BE CONSIDERED TO BE A VIEW TAKEN BY THE ASSESSING OFFI CER. THEREFORE, THERE IS NO QUESTION OF ANY CHANGE OF OPINION AS CL AIMED BY THE ASSESSEE. IN VIEW OF THE ABOVE, THIS TRIBUNAL IS O F THE CONSIDERED OPINION THAT THE ASSESSING OFFICER HAS RIGHTLY REOP ENED THE ASSESSMENT. THEREFORE, THIS TRIBUNAL DO NOT FIND A NY REASON TO INTERFERE WITH THE ORDER OF THE LOWER AUTHORITY. A CCORDINGLY, THE SAME IS CONFIRMED. 7. NOW COMING TO THE CLAIM OF THE ASSESSEE ON MERIT , THE FIRST ISSUE IS WITH REGARD TO SUBSIDY GIVEN FOR WINDMILL. 8. SH. T. BANUSEKAR, THE LD. REPRESENTATIVE FOR THE ASSESSEE, SUBMITTED THAT THE SUBSIDY WAS GIVEN AS INCENTIVE T O THE ASSESSEE FOR SETTING UP OF A NON-CONVENTIONAL POWER GENERATI NG WIND-TURBINE 7 I.T.A. NO.1689/MDS/2000 UNIT. THE SUBSIDY WAS NOT GIVEN TO MEET THE PART O F THE COST OF WINDMILL. REFERRING TO THE EXPLANATION 10 TO SECTI ON 43(1) OF THE ACT, AS INTRODUCED BY FINANCE (NO.2) ACT, 1998 WITH EFFECT FROM 01.04.1999, THE LD. REPRESENTATIVE SUBMITTED THAT T HIS EXPLANATION WAS INTRODUCED WITH A VIEW TO REDUCE THE DIRECT AND INDIRECT SUBSIDY FROM THE COST OF FIXED ASSET. HOWEVER, THIS AMENDM ENT WAS BROUGHT IN THE STATUTE BOOK WITH PROSPECTIVE OPERATION. TH E INTENTION OF THE PARLIAMENT TO REDUCE THE CAPITAL SUBSIDY FROM THE C OST OF THE FIXED ASSET IS FOR SUBSEQUENT ASSESSMENT YEAR. THEREFORE , EXPLANATION 10 TO SECTION 43(1) OF THE ACT IS NOT APPLICABLE DU RING THE YEAR UNDER CONSIDERATION. 9. REFERRING TO THE JUDGMENT OF APEX COURT IN CIT V . P.J. CHEMICALS LTD. (1994) 210 ITR 830, THE LD. REPRESEN TATIVE SUBMITTED THAT THE SUBSIDY IS INTENDED AS AN INCENT IVE TO ENCOURAGE THE ENTREPRENEURS TO ESTABLISH INDUSTRIES. THE APE X COURT FURTHER FOUND THAT THE EXPRESSION ACTUAL COST IN SECTION 43(1) OF THE ACT NEEDS TO BE INTERPRETED LIBERALLY. THE SUBSIDY DOE S NOT PARTAKE OF THE INCIDENTS WHICH ATTRACT THE CONDITIONS FOR ITS DEDUCTIBILITY FROM THE ACTUAL COST. THEREFORE, THE APEX COURT FOUND THAT THE AMOUNT OF SUBSIDY IS NOT TO BE DEDUCTED FROM THE ACTUAL COST UNDER SECTION 8 I.T.A. NO.1689/MDS/2000 43(1) OF THE ACT FOR THE PURPOSE OF COMPUTING DEPRE CIATION. IN VIEW OF THIS JUDGMENT OF THE APEX COURT, ACCORDING TO TH E LD. REPRESENTATIVE, THE SUBSIDY GRANTED TO THE ASSESSEE FOR ESTABLISHING THE WINDMILL CANNOT BE DEDUCTED FOR COMPUTING THE A LLOWABLE DEPRECIATION. 10. ON THE CONTRARY, SHRI N. MADHAVAN, THE LD. DEPA RTMENTAL REPRESENTATIVE, SUBMITTED THAT THE ASSESSEE RECEIVE D SUBSIDY ON THE WINDMILL FROM STATE INDUSTRIES PROMOTION CORPOR ATION OF TAMIL NADU LTD. TO THE EXTENT OF ` 6,24,000/-. THE SUBSIDY WAS GRANTED SPECIFICALLY FOR THE WINDMILL INSTALLED BY THE ASSE SSEE. THEREFORE, THE SUBSIDY SHOULD BE DEDUCTED FROM THE COST OF THE WINDMILL TO ARRIVE AT THE ACTUAL COST OF WINDMILL UNDER SECTION 43(1) OF THE ACT. SINCE THIS WAS NOT CONSIDERED IN THE ORIGINAL ASSES SMENT, THE ASSESSING OFFICER REDUCED THE SUBSIDY GRANTED TO TH E ASSESSEE BY STATE INDUSTRIES PROMOTION CORPORATION OF TAMIL NAD U LTD. AND DISALLOWED THE EXCESSIVE DEPRECIATION GRANTED TO TH E ASSESSEE. THEREFORE, THE CIT(APPEALS) HAS RIGHTLY CONFIRMED T HE DISALLOWANCE. 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. ADMITTEDLY, THE ASSESSEE HAS RECEIVED SUBSIDY FROM STATE INDUSTRIES PROMOTION 9 I.T.A. NO.1689/MDS/2000 CORPORATION OF TAMIL NADU IN RESPECT OF WINDMILL IN STALLED BY THE ASSESSEE. THE ASSESSEE HAS FILED A COPY OF THE AGR EEMENT SAID TO BE ENTERED WITH STATE INDUSTRIES PROMOTION CORPORAT ION OF TAMIL NADU LTD. AT PAGE 38 OF THE PAPER-BOOK. THIS AGREE MENT CLEARLY SAYS THAT THE ASSESSEE IS ONE OF THE BENEFICIARIES WHO APPLIED FOR GRANT OF SUBSIDY UNDER 15% STATE CAPITAL SUBSIDY IN RESPECT OF THE WINDMILL ESTABLISHED AT ARALVAIMOZHI VILLAGE, THOVA LAI TALUK, KANYAKUMARI DISTRICT IN THE STATE OF TAMIL NADU. T HE SUBSIDY WILL BE DISBURSED AS AND THE WINDMILL WAS ERECTED BY THE ASSESSEE. THE AGREEMENT ALSO SHOWS THAT THE ASSESSEE SHALL UT ILIZE THE SUBSIDY FOR THE INDUSTRIAL UNIT IN ACCORDANCE WITH THE SCHEME WITHIN A PERIOD OF ONE YEAR FROM THE DATE OF RECEIPT OF TH E LAST INSTALMENT OR FULL AMOUNT. IT IS FURTHER CLARIFIED THAT 85% OF T HE SUBSIDY WILL BE DISBURSED AFTER VERIFYING AS TO CREATED PHYSICALLY. ANOTHER 15% SHALL BE DISBURSED AFTER THE UNIT COMMENCED ITS COM MERCIAL PRODUCTION. FROM THE ABOVE AGREEMENT IT IS OBVIOUS THAT THE SUBSIDY WAS GIVEN BY THE GOVERNMENT FOR CREATION OF A CAPITAL ASSET, NAMELY, THE WINDMILL FOR GENERATING POWER. 12. WE HAVE CAREFULLY GONE THROUGH THE JUDGMENT OF APEX COURT IN P.J. CHEMICALS LTD. (SUPRA). IN THE CASE BEFORE THE APEX COURT, 10 I.T.A. NO.1689/MDS/2000 THE ASSESSEE CLAIMED DEPRECIATION AFTER REDUCING TH E SUBSIDY GRANTED FOR ESTABLISHING INDUSTRIES IN THE BACKWARD AREA. THE APEX COURT, AFTER CONSIDERING THE SCHEME OF THE ACT, FOU ND THAT IF A PORTION OF COST IS MET DIRECTLY OR INDIRECTLY BY AN Y OTHER PERSON OR AUTHORITY, IT SHOULD BE DEDUCTED FOR ARRIVING AT TH E COST OF THE ASSET. THE REAL QUESTION IS AS TO THE CHARACTER AND NATURE OF SUBSIDY. THE APEX COURT FURTHER OBSERVED THAT THE REAL QUESTION IS AS TO THE CHARACTER AND NATURE OF SUBSIDY WHETHER IT WAS REAL LY INTENDED TO SUBSIDISE THE COST OF THE CAPITAL OR WAS INTENDED A S AN INCENTIVE TO ENCOURAGE TO MOVE TO BACKWARD AREA TO ESTABLISH IND USTRIES. AFTER TAKING NOTE OF THE CONFLICTING JUDICIAL OPINIONS AM ONG VARIOUS COURTS IN THE COUNTRY, THE APEX COURT FOUND THAT THE GOVER NMENT SUBSIDY, IT IS NOT UNREASONABLE TO SAY, IS AN INCENTIVE NOT FOR THE SPECIFIC PURPOSE OF MEETING A PORTION OF THE COST OF THE ASS ETS, THOUGH QUANTIFIED AS OR GEARED TO A PERCENTAGE OF SUCH COS T. IF THAT BE SO, IT DOES NOT PARTAKE OF THE CHARACTER OF A PAYMENT INTE NDED EITHER DIRECTLY OR INDIRECTLY TO MEET THE ACTUAL COST. AC CORDINGLY, THE APEX COURT FOUND THAT THE SUBSIDY GRANTED TO THE ASSESSE E CANNOT BE REDUCED FROM THE ACTUAL COST FOR COMPUTING DEPRECIA TION. IN FACT, THE APEX COURT APPROVED THE JUDGMENT OF PUNJAB & HARYAN A HIGH COURT. IN FACT, THE APEX COURT OBSERVED AS FOLLOWS AT PAGE 481: 11 I.T.A. NO.1689/MDS/2000 ON A CONSIDERATION OF THE MATTER THE VIEW THAT COMMENDS ITSELF AS ACCEPTABLE IS THE ONE WHICH HAS COMMENDED ITSELF TO THE MAJORITY OF THE HIGH COURTS . IT IS, OF COURSE, NOT THE NUMERICAL STRENGTH THAT PREVAILS TH OUGH THE FACT THAT A PARTICULAR VIEW HAS COMMENDED ITSELF TO A MAJORITY OF THE HIGH COURTS IN THE COUNTRY IS A MATTER FOR C ONSIDERATION BUT THE TENSILE STRENGTH OF THE ACCEPTABLE LOGIC IN THOSE DECISIONS. IT IS APTLY SAID THAT 'A JUDGE WHO ANNOU NCES A DECISION MUST BE ABLE TO DEMONSTRATE THAT HE BEGAN FROM RECOGNIZED LEGAL PRINCIPLES AND REASONED IN AN INTE LLECTUALLY COHERENT AND POLITICALLY NEUTRAL WAY TO HIS RESULT' . IN THE PRESENT CASE THE REASONING UNDERLYING, AND IMPLICIT IN, THE CONCLUSION REACHED BY THE MAJORITY OF THE HIGH COUR TS CANNOT BE SAID TO BE AN UNREASONABLE VIEW AND ON A PREPOND ERANCE OF PREFERABILITY THAT VIEW COMMENDS ITSELF PARTICULARL Y IN THE CONTEXT OF A TAXING STATUTE. THE EXPRESSION 'ACTUAL CO ST' NEEDS TO BE INTERPRETED LIBERALLY. THE SUBSIDY OF T HE NATURE WE ARE CONCERNED WITH, DOES NOT PARTAKE OF THE INCIDEN TS WHICH ATTRACT THE CONDITIONS FOR THEIR DEDUCTIBILITY FROM 'ACTUAL COST'. THE GOVERNMENT SUBSIDY, IT IS NOT UNREASONABLE TO SAY, IS AN INCENTIVE NOT FOR THE SPECIFIC PURPOSE O F MEETING A PORTION OF THE COST OF THE ASSETS, THOUGH QUANTIFIE D AS OR GEARED TO A PERCENTAGE OF SUCH COST. IF THAT BE SO, IT DOES NOT PARTAKE OF THE CHARACTER OF A PAYMENT INTENDED EITH ER DIRECTLY OR INDIRECTLY TO MEET THE 'ACTUAL COST'. W E SHOULD PREFER THE REASONING OF THE MAJORITY OF THE HIGH CO URTS TO THE ONE FOUND ACCEPTABLE BY THE HIGH COURT OF PUNJAB AN D HARYANA. IN THIS CASE ALSO, THE SUBSIDY WAS ADMITTEDLY GRANT ED FOR ESTABLISHING WINDMILL. IT IS NOT FOR THE PURPOSE O F CARRYING OUT THE OPERATION OF THE WINDMILL. SINCE THE PART OF THE C OST WAS MET BY SUBSIDY GRANTED BY THE GOVERNMENT, THIS TRIBUNAL IS OF THE 12 I.T.A. NO.1689/MDS/2000 CONSIDERED OPINION THAT THE JUDGMENT OF APEX COURT IN P.J. CHEMICALS (SUPRA) IS SQUARELY APPLICABLE TO THE FAC TS OF THE CASE. THEREFORE, THIS KIND OF SUBSIDY DOES NOT PARTAKE OF THE INCIDENTS WHICH ATTRACT THE CONDITIONS FOR ITS DEDUCTIBILITY FROM THE ACTUAL COST. THEREFORE, BY RESPECTFULLY FOLLOWING THE JUDGMENT O F APEX COURT, WE HOLD THAT THE SUBSIDY CANNOT BE REDUCED FROM THE AC TUAL COST FOR THE PURPOSE OF COMPUTING DEPRECIATION. AS RIGHTLY SUBM ITTED BY THE LD. REPRESENTATIVE FOR THE ASSESSEE, EXPLANATION 10 TO SECTION 43(1) OF THE ACT WAS INTRODUCED WITH EFFECT FROM 01.04.1999. THEREFORE, IT IS NOT APPLICABLE FOR THE YEAR UNDER CONSIDERATION. I N VIEW OF THE ABOVE DECISION, WE ARE UNABLE TO UPHOLD THE ORDERS OF THE LOWER AUTHORITIES. ACCORDINGLY, THE ORDERS OF THE LOWER AUTHORITIES ARE SET ASIDE AND THE ASSESSING OFFICER IS DIRECTED NOT TO REDUCE THE SUBSIDY OF ` 6,24,000/- FROM THE ACTUAL COST WHILE COMPUTING DEPRECIATION. 13. THE NEXT GROUND OF APPEAL IS WITH REGARD TO COS T OF REPLACEMENT OF MACHINERY TO THE EXTENT OF ` 25,84,620/-. 14. SH. T. BANUSEKAR, THE LD. REPRESENTATIVE FOR TH E ASSESSEE, SUBMITTED THAT THE ASSESSEE HAS REPLACED RING FRAME S, DRAW FRAMES AND CARDING MACHINE. THE COST OF REPLACEMENT OF MA CHINERY WAS 13 I.T.A. NO.1689/MDS/2000 TREATED AS CURRENT REPAIRS. HOWEVER, THE AUTHORITI ES BELOW REJECTED THE CLAIM OF THE ASSESSEE. REFERRING TO THE JUDGME NT OF MADRAS HIGH COURT IN CIT V. JANAKIRAM MILLS LTD. & OTHERS (2005) 275 ITR 403, THE LD. REPRESENTATIVE SUBMITTED THAT THE COST OF MACHINERY WAS ALLOWED AS REVENUE EXPENDITURE. REFERRING TO T HE JUDGMENT OF VARIOUS HIGH COURTS, INCLUDING THE JUDGMENT OF KERA LA HIGH COURT IN CIT V. STEEL COMPLEX LTD. (1999) 238 ITR 1054, THE LD. REPRESENTATIVE SUBMITTED THAT WHEN THE EXPENDITURE WAS RESULTING IN ADVANTAGE OF ENDURING NATURE, BUT NEVERTHELESS THE REVENUE FEELS THE EXPENDITURE LAID OUT WOULD STILL BE REGARDED AS REVENUE IN NATURE. REFERRING TO THE JUDGMENT OF APEX COURT IN CIT V. MAHALAKSHMI TEXTILE MILLS LTD. 919670 66 ITR 710, T HE LD. REPRESENTATIVE SUBMITTED THAT THE COST OF REPLACEME NT OF MACHINERY HAS TO BE ALLOWED AS REVENUE EXPENDITURE. THEREFOR E, THE CIT(APPEALS) IS NOT JUSTIFIED IN CONFIRMING THE DIS ALLOWANCE MADE BY THE ASSESSING OFFICER. THE LD. REPRESENTATIVE HAS ALSO PLACED RELIANCE ON THE JUDGMENT OF MADRAS HIGH COURT IN CI T V. SREE NARASIMHA TEXTILES (P.) LTD. (1999) 239 ITR 351 AND THE DECISION OF THIS BENCH OF THE TRIBUNAL IN AMBIKA COTTON MILLS L TD. V. JCIT (2001) 71 TTJ 871 AND THE JUDGMENT OF MADRAS HIGH COURT IN CIT V. GITANJALI MILLS LTD. (2004) 265 ITR 681. 14 I.T.A. NO.1689/MDS/2000 15. ON THE CONTRARY, SHRI N. MADHAVAN, THE LD. DEPA RTMENTAL REPRESENTATIVE, SUBMITTED THAT WHAT WAS REPLACED BY THE ASSESSEE IS INDEPENDENT MACHINERY IN THE TEXTILE MILL. THER EFORE, IT CANNOT BE ALLOWED AS REVENUE EXPENDITURE OR CURRENT REPAIR. THEREFORE, THE CIT(APPEALS), ACCORDING TO THE LD. D.R., HAS CONFIR MED THE ORDER OF THE ASSESSING OFFICER BY PLACING RELIANCE ON THE JU DGMENTS OF APEX COURT IN CIT V. MIR MOHAMMED ALI (53 ITR 165) AND I N CIT V. BALLIMAL NAVAL KISHORE (224 ITR 414). 16. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE REPLACEMENT OF RING FRAMES, DRAW FRAMES AND CARDING MACHINE WAS SUBJECT MATTER OF CONSIDERATION BEFORE THE APEX COURT IN CI T V. SARAVANA SPINNING MILLS P. LTD. (2007) 293 ITR 201 AND IN CI T V. RAMARAJU SURGICAL COTTON MILLS (2007) 294 ITR 328. THE APEX COURT HELD THAT REPLACEMENT OF ASSETS WOULD AMOUNT TO REVENUE EXPEN DITURE. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINI ON THAT THE EXPENDITURE INCURRED BY THE ASSESSEE FOR REPLACING THE RING FRAMES, DRAW FRAMES AND CARDING MACHINE HAS TO BE CONSIDERE D IN THE LIGHT OF THE JUDGMENTS OF APEX COURT IN SARAVANA SPINNING MILLS P. LTD. (SUPRA) AND RAMARAJU SURGICAL COTTON MILLS (SUPRA). SINCE BOTH THE 15 I.T.A. NO.1689/MDS/2000 JUDGMENTS OF APEX COURT WERE NOT CONSIDERED BY THE LOWER AUTHORITIES, THIS TRIBUNAL IS OF THE CONSIDERED OPI NION THAT THE MATTER NEEDS TO BE RECONSIDERED IN THE LIGHT OF THE JUDGME NTS RENDERED BY THE APEX COURT IN SARAVANA SPINNING MILLS P. LTD. ( SUPRA) AND RAMARAJU SURGICAL COTTON MILLS (SUPRA) AND THEREAFT ER DECIDE THE SAME IN ACCORDANCE WITH LAW AFTER GIVING REASONABLE OPPORTUNITY TO THE ASSESSEE. 17. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED ON 4 TH MARCH, 2016 AT CHENNAI. SD/- SD/- (. !'# ! ) ( . . . ) (A. MOHAN ALANKAMONY) (N.R.S. GANESAN) % / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 5 /DATED, THE 4 TH MARCH, 2016. KRI. / -267 87)2 /COPY TO: 1. +, /APPELLANT 2. -.+, /RESPONDENT 3. 1 92 () /CIT(A), COIMBATORE 4. 1 92 /CIT, COIMBATORE 5. 7: -2 /DR 6. ( ; /GF.