Vishnu Lakshmi Mills Private Limited, CHENNAI V. DCIT, CHENNAI

ITA 2206/CHNY/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 95912 (ITAT-CHENNAI)
• Duration Of Justice: 11 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-08-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 24-06-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 02-09-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: N MADHAVAN
• Assessee Lawyers: DR ANITA SUMANTH
• Keywords: Capital asset; Depreciation; Question of law; Revenue expenditure; Capital expenditure
• Section: 37

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , B B ENCH, CHENNAI . , ' $ , % ' BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./ I.T.A.NO . 2205 & 2206/MDS/2014 ( / ASSESSMENT YEAR: 2007-08 & 2008-09) M/S.VISHNU LAKSHMI MILLS PVT.LTD., 1C, GLENEDEN PLACE, 310, POONAMALLEE HIGH ROAD, KILPAUK, CHENNAI-600 010. VS. DEPUTY COMMISSIONER OF INCOME TAX, COMPANY CIRCLE-III(4) 121, N.HROAD, CHENNAI-600 034. PAN:AAACV1182F ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : DR. ANITA SUMANTH, ADVOCATE /RESPONDENT BY : MR. N.MADHAVAN, JCIT /DATE OF HEARING : 24 TH JUNE, 2015 /DATE OF PRONOUNCEMENT : 19 TH AUGUST, 2015 / O R D E R PER CHALLA NAGENDRA PRASAD, JM: BOTH THESE APPEALS ARE FILED BY THE ASSESSEE AGAI NST COMMON ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-III, CHENNAI DATED 19.06.2014 FOR THE ASS ESSMENT YEARS 2007-08 AND 2008-09. THE ONLY ISSUE IN BOTH T HESE APPEALS OF THE ASSESSEE IS THAT COMMISSIONER OF INC OME TAX (APPEALS) OUGHT TO HAVE NOTED THAT REPLACEMENT OF C ARDING & ROVING MACHINES AND RING FRAMES ARE ALLOWABLE AS R EVENUE EXPENDITURE UNDER SECTION 37 OF THE ACT. 2 ITA NOS.2205 & 2206/MDS/2014 2. BRIEF FACTS ARE THAT ASSESSEE INCURRED EXPENDITU RE OF ` 1,39,84,946/- AND ` 53,61,046/- TOWARDS COST OF RING FRAMES AND CARDING MACHINES & ROVING MACHINES IN THE ASSES SMENT YEARS 2007-08 AND 2008-09 RESPECTIVELY AND CLAIMED THE EXPENDITURE AS REVENUE EXPENDITURE. HOWEVER, THE ASSESSING OFFICER TREATED THIS EXPENDITURE AS CAPIT AL EXPENDITURE AND ALLOWED DEPRECIATION ON SUCH MACHIN ERY, PLACING RELIANCE ON THE DECISION OF CIT VS. SRI MANGAYARKARASI MILLS PVT.LTD. (315 ITR 114). THE AS SESSEE PREFERRED APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) AND CONTENDED THAT CARDING MACHINE, ROVIN G MACHINE AND RING FRAMES REPLACED BY THE ASSESSEE HA S NOT INCREASED ANY PRODUCTION CAPACITY AND SINCE THE REP LACEMENT OF PARTS MACHINES HAD NOT RESULTED IN CAPACITY ADD ITION OF THE UNDERTAKING, THEY HAVE TO BE ALLOWED AS REVENUE EXP ENDITURE. THE COMMISSIONER OF INCOME TAX (APPEALS) CONSIDERIN G THE SUBMISSIONS OF THE ASSESSEE AND TAKING INTO ACCOUNT THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F CIT VS. SRI MANGAYARKARASI MILLS PVT.LTD.(SUPRA) REJECTED T HE CONTENTIONS OF THE ASSESSEE AND UPHELD THE ACTION O F THE 3 ITA NOS.2205 & 2206/MDS/2014 ASSESSING OFFICER IN TREATING THE EXPENDITURE AS CA PITAL EXPENDITURE. 3. COUNSEL FOR THE ASSESSEE BEFORE US SUBMITS THAT THERE IS NO CAPACITY ADDITION BY WAY OF REPLACEMENT OF MA CHINERY, THEREFORE IN VIEW OF THE DECISION OF THE HONBLE SU PREME COURT IN THE CASE OF CIT VS. RAMARAJU SURGICAL COTT ON MILLS (294 ITR 328), THE MATTER HAS TO BE REMITTED BACK T O THE ASSESSING OFFICER TO FIND OUT WHETHER THERE IS ANY INCREASE IN PRODUCTION AND IN CASE IF THERE IS NO INCREASE IN P RODUCTION IT HAS TO BE ALLOWED AS REVENUE EXPENDITURE. 4. DEPARTMENTAL REPRESENTATIVE VEHEMENTLY SUPPORTS THE ORDERS OF THE LOWER AUTHORITIES AND PLACES RELIAN CE ON THE DECISION OF THE SUPREME COURT IN THE CASE OF CIT VS . SRI MANGAYARKARASI MILLS PVT.LTD.(SUPRA) AND SUBMITS T HAT THE HONBLE SUPREME COURT HAS CLEARLY HELD THAT MACHINE RY REPLACEMENT IN SPINNING MILL IS NEITHER CURRENT REP AIRS NOR ALLOWABLE AS REVENUE EXPENDITURE AND THEREFORE PLE ADS FOR SUSTAINING THE ORDERS OF THE LOWER AUTHORITIES. 4 ITA NOS.2205 & 2206/MDS/2014 5. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHOR ITIES AND THE DECISIONS RELIED ON. COUNSEL FOR THE ASSESS EE VEHEMENTLY PLACES RELIANCE ON THE DECISION OF THE S UPREME COURT IN THE CASE OF CIT VS. RAMARAJU SURGICAL COTT ON MILLS (SUPRA) AND SUBMITS THAT THE MATTER HAS TO BE LOOKE D INTO BY THE ASSESSING OFFICER IN RESPECT OF THE CAPACITY AD DITION IN VIEW OF THE REPLACEMENT MADE BY THE ASSESSEE. ACCOR DING TO THE COUNSEL FOR THE ASSESSEE, THERE IS NO INCREASE IN SPINDLEAGE EVEN AFTER REPLACEMENT OF MACHINERY AND THERE IS NO INCREASE IN PRODUCTION AND THERE IS INCREASE IN QUALITY OR PRODUCTION. SHE SUBMITS THAT IN VIEW OF THE DECISIO N OF CIT VS. RAMARAJU SURGICAL COTTON MILLS (SUPRA) THE MATT ER HAS TO BE LOOKED INTO BY THE ASSESSING OFFICER. 6. WE HAVE GONE THROUGH THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. RAMARAJU SURGI CAL COTTON MILLS (SUPRA). IN THE LATTER DECISION OF THE SUPREME COURT I.E. CIT VS. SRI MANGAYARKARASI MILLS PVT.LT D.(SUPRA) , THE HONBLE SUPREME COURT DISTINGUISHED THE DECISIO N OF RAMARAJU SURGICAL COTTON MILLS (SUPRA) AND THE CIRCUMSTANCES IN WHICH THE MATTER WAS REMITTED TO THE FILE OF 5 ITA NOS.2205 & 2206/MDS/2014 THE COMMISSIONER OF INCOME TAX (APPEALS) AS THERE W AS NO CLARITY IN THE CONTENTIONS RAISED BY THE ASSESSEE I N THOSE APPEALS AS TO UNDER WHICH PROVISO THE CLAIM WAS MAD E EITHER UNDER SECTION 31 AS CURRENT REPAIRS OR UNDER 37 AS REVENUE EXPENDITURE. THUS, THE HONBLE SUPREME COURT REMIT TED THE MATTER TO THE FILE OF THE COMMISSIONER OF INCOME TA X (APPEALS) AS THERE IS NO CLARITY IN THE CLAIM OF TH E ASSESSEE. THIS POSITION WAS MADE CLEAR IN THE CASE OF CIT VS. SRI MANGAYARKARASI MILLS PVT.LTD.(SUPRA), WHEREIN THE S UPREME COURT HELD THAT MACHINERY REPLACED IN SPINNING MILL S IS NOT REVENUE EXPENDITURE. WHILE HOLDING SO, THE HONBLE SUPREME COURT OBSERVED AS UNDER:- 9. THE MAIN QUESTION THAT NEEDS TO BE DECIDED IN THIS APPEAL MAY BE FORMULATED AS FOLLOWS :- 'WHETHER EXPENDITURE INCURRED ON REPLACEMENT OF MACHINERY, IN THE FACTS AND CIRCUMSTANCES OF THIS CASE, AMOUNTS TO 'REVENUE EXPENDITURE' DEDUCTIBLE UNDER SECTION 37 OF THE ACT OR 'CURRENT REPAIRS' DEDUCTIBLE UNDER SECTION 31 OF THE ACT.' 10. IT IS PERTINENT TO MENTION HERE THAT THE RESPONDE NT ONLY STATED THAT ITS CLAIM WAS LIMITED TO THE EXPENDITURE BEING OF A REVENUE NATURE AND THUS ALLOWABLE UNDER SECTION 37 OF THE ACT. NOWHERE HAD THE RESPONDENT CLAIMED THAT THE SAID EXPENDITURE AMOUNTED TO 'CURRENT REPAIRS' UNDER SECTION 31 OF T HE ACT. FURTHER, THE APPELLANT ITSELF HAD RESTRICTED T HE ISSUE TO THAT OF REVENUE EXPENDITURE IN ITS APPEAL TO THE HIGH COURT OF MADRAS, AGAINST WHICH IT HAS NOW 6 ITA NOS.2205 & 2206/MDS/2014 FILED THIS APPEAL. ACCORDING TO THE RESPONDENT, THE RE IS NO ISSUE REGARDING THE EXPENDITURE AMOUNTING TO 'CURRENT REPAIRS' UNDER SECTION 31 OF THE ACT. WE A RE NOT INCLINED TO UPHOLD THIS SUBMISSION OF THE RESPONDENT. THE FACT THAT THE APPELLANT HAS CONTENDED BEFORE THE COURTS BELOW THAT EACH OF THE ITEM OF MACHINERY IN A SPINNING MILL IS INDEPENDENT, THAT THE RESPONDENT HAS ARGUED AGAINST IT, AND HAS GIVEN EVIDENCE TO TRY TO SUPPORT ITS CONTENTION, AN D ALSO THAT THE ASSESSEE BELIEVES THAT REPLACEMENT IS ONLY OF SPARE PARTS IN THE ENTIRE SYSTEM OF THE SPINNING MILLS, MAKES IT CLEAR THAT A QUESTION HAS ARISEN HERE AS TO WHETHER REPLACEMENT OF ONE OR MORE ITEMS OF MACHINERY AMOUNTS TO REPAIR OF THE ENTIRE INTEGRATED MACHINERY OF THE SPINNING MILL OR ACQUISITION OF A NEW INDEPENDENT MACHINERY. 11. THE LEARNED COUNSEL FOR THE APPELLANT SUBMITTED THAT THE COURTS BELOW ERRED IN REJECTING THE CONTENTION OF THE DEPARTMENT THAT EACH ITEM OF MACHINERY IN A TEXTILE MILL SHOULD BE TREATED AS INDEPENDENT AND NOT AN INTEGRAL PART OF THE WHOLE PLANT OF THE SPINNING MILL. THE MADRAS HIGH COURT HAS HELD IN THE CASE OF CIT V. MADRAS CEMENTS LTD. [2002] 255 ITR 243 THAT EACH ITEM OF MACHINERY IN A CEMENT FACTORY HAS TO BE CONSIDERED AS BEING AN INDEPENDENT MACHINERY. LEARNED COUNSEL FOR THE APPELLANT, FURTHER, CONTENDED THAT THE SCHEME OF PRODUCTION IN A TEXTILE MILL IS SIMILAR TO THE INTE GRATED SCHEME OF PRODUCTION IN A CEMENT FACTORY, WHERE NO INDEPENDENT COMMODITY CAN BE SAID TO HAVE BEEN PRODUCED BEFORE IT, WHICH IS A GROUND IN A ROLLER M ILL. AS PER THE LEARNED COUNSEL FOR THE APPELLANT, THE COURTS BELOW ERRED IN DISTINGUISHING THIS DECISION OF THE MADRAS HIGH COURT. THUS, GIVEN THAT EACH ITEM OF MACHINERY IS INDEPENDENT, THE REPLACEMENT OF ANY SUCH MACHINE WILL AMOUNT TO ACQUISITION OF A NEW ASSET AND NOT 'REPAIR' OF THE ENTIRE INTEGRATED MACHINERY OF THE SPINNING MILL. IN THIS CONNECTION, RELIANCE WAS PLACED ON A DECISION OF THIS COURT IN BALLIMAL NAVAL KISHORE'S CASE (SUPRA) WHEREIN IT IS 7 ITA NOS.2205 & 2206/MDS/2014 CLEARLY HELD THAT 'CURRENT REPAIRS' UNDER THE ACT MEANS EXPENDITURE ON MACHINERY, PLANT OR FURNITURE WHICH IS NOT FOR THE PURPOSE OF RENEWAL OR RESTORATION BUT WHICH IS ONLY FOR THE PURPOSE OF PRESERVING OR MAINTAINING AN ALREADY EXISTING ASSET AND THAT DOES NOT BRING A NEW ASSET INTO EXISTENCE OR DOES NOT GIVE TO THE ASSESSEE A NEW OR DIFFERENT ADVANTAGE. LEARNED COUNSEL FOR THE APPELLANT FURTHE R CONTENDED THAT REPLACEMENT OF OLD MACHINERY WITH NEW MACHINERY CANNOT BE CONSIDERED AS CURRENT REPAIRS AS SUCH OR EVEN REVENUE EXPENDITURE, SINCE IT GIVES AN ENDURING BENEFIT TO THE ASSESSEE. ALSO, IF IN EVERY CASE SUCH REPLACEMENT IS ALLOWED AS REVENUE EXPENDITURE THE PRINCIPLE OF ALLOWING DEPRECIATION WILL LOSE ITS SIGNIFICANCE. LEARNED COUNSEL FURTHER SUBMITTED THAT THE COURTS BELOW ERRED IN OVERLOOKING THE DEFINITIONS OF 'ASSETS' AN D 'BLOCK OF ASSETS' UNDER EXPLANATION 3 OF SECTION 32(1)(IZ) OF THE ACT AND THUS, MISCONSTRUING THE PROVISION FOR COMPOSITION OF THE 'BLOCK OF ASSETS' AS PER THE DEFINITION OF 'WRITTEN DOWN VALUE' AS GIVEN UNDER SECTION 43(6)(C) OF THE ACT, WHICH AID THE CHARGING SECTION 28, AS TO THE ASSESS ABILITY OF INCOME FROM BUSINESS AND PROFESSION. LEARNED COUNSEL FOR THE APPELLANT FURTHER CONTENDED THAT TH E COURTS BELOW HAD GONE WRONG IN EQUATING THE COMPLICATED MACHINERY OF A SPINNING MILL WITH A TUBE-LIGHT IN RELYING ON THE BOARDS' CIRCULAR NO. 69, DATED 27-11-1957 ON 'TUBE-LIGHTS' WHICH STATED THAT ONLY FIRST TIME PURCHASE OF A TUBE-LIGHT AMOUNTS TO CAPITAL EXPENDITURE, AND SUBSEQUENT REPLACEMENT WOULD ONLY BE REVENUE EXPENDITURE. LASTLY, LEARNED COUNSEL FOR THE APPELLANT EMPHASISED THAT THE RELIANCE ON THE DECISION IN JANAKIRAM MILLS LTD. 'S CASE (SUPRA) BY THE HIGH COURT WAS MISPLACED, INASMUCH AS THE HIGH COURT HAD FAILED TO APPRECIATE THAT AN APPEAL HAD ALREADY BEEN FILED AGAINST IT BEFORE THIS COURT AND THUS THE DECISION OF THE HIGH COURT IN JANAKIRAM MILLS LTD. 'S CASE (SUPRA) WAS NOT FINAL AND BINDING. 8 ITA NOS.2205 & 2206/MDS/2014 12. THE LEARNED COUNSEL FOR THE RESPONDENT SUBMITTED THAT THE RESPONDENT HAD INCURRED EXPENDITURE FOR REPLACING THE OLD AND WORN OUT PART S OF MACHINERY OF THE SPINNING MILL. THEY ARE MERELY PARTS OF THE SPINNING MILL, DEPENDENT ON OTHER PART S OF THE TEXTILE MILL, AND THE REPLACED MACHINERY CANNOT FUNCTION INDEPENDENTLY. FURTHER, THE LEARNED COUNSEL FOR THE RESPONDENT ARGUED THAT THE HIGH COURT RIGHTLY DISTINGUISHED THE MADRAS CEMENTS LTD. 'S CASE (SUPRA) BECAUSE IN THAT CASE THE WHOLE PLANT WAS RELOCATED AND IN ITS PLACE A WHOLE NEW PLANT WAS INSTALLED. THE LEARNED COUNSEL FOR THE RESPONDENT FURTHER ARGUED THAT THE CASE OF BALLIMAL NAVAL KISHORE (SUPRA) IS NOT APPLICABLE HERE BECAUSE IN THAT CASE A GINNING FACTORY WAS CONVERTED TO A CINEMA THEATRE AND WHAT THE ASSESSEE THERE DID WAS NOT REPLACEMENT OF MACHINERY PARTS OF AN INTEGRATED PLANT BUT TOTAL CONVERSION INTO A THEATR E. THE LEARNED COUNSEL FOR THE RESPONDENT HAS CONTENDED THAT THE PROVISIONS RELATING TO 'ASSETS' AND 'BLOCK OF ASSETS' ARE IMMATERIAL IN THE INSTANT CAS E, WHICH DEALS WITH REVENUE EXPENDITURE ON REPLACEMENT OF MACHINERY AND WOULD NOT COME UNDER 'BLOCK OF ASSETS'. FURTHER, THE LEARNED COUNS EL FOR THE RESPONDENT ALSO RELIED ON THE BOARD'S CIRCULAR NO. 69, DATED 27-11- 1957 WHICH, THE RESPONDENT CLAIMED, IS STILL VALID AND AS PER WHICH , REPLACEMENT OF WORN OUT PARTS, EVEN IF THE SAME IS IN A TEXTILE MILL, WOULD CONSTITUTE REVENUE EXPENDITUR E. THE LEARNED COUNSEL FOR THE RESPONDENT HAS ALSO ARGUED THAT THE ARGUMENT OF ENDURING BENEFIT TO THE RESPONDENT, TAKEN BY THE APPELLANT, IS NO LONGER A GOOD LAW. LASTLY, LEARNED COUNSEL FOR THE RESPONDEN T SUBMITTED THAT THE HIGH COURT WAS RIGHT IN RELYING ON ITS OWN JUDGMENT IN THE CASE OF JANAKIRAM MILLS LTD. (SUPRA) BECAUSE THIS COURT, BY ITS ORDER DATED 21-8- 2007 IN CIVIL APPEAL NO. 7594/2005, HAS ALREADY PRONOUNCED UPON THE VALIDITY OF THE JUDGMENT OF THE HIGH COURT IN THAT MATTER AND HAS DISPOSED OF THE APPEAL IN THE SAME. 9 ITA NOS.2205 & 2206/MDS/2014 13. WE HAVE HEARD AND CONSIDERED ALL THESE CONTENTIONS OF THE LEARNED COUNSEL FOR THE PARTIES AND ALSO PERUSED THE MATERIALS ON RECORD AND ALSO EXAMINED THE IMPUGNED ORDER PASSED BY THE HIGH COURT. 14. THE FIRST ISSUE THAT NEEDS TO BE RESOLVED IS WHETHER EACH MACHINE IN A TEXTILE MILL IS AN INDEPENDENT ITEM OR MERELY A PART OF A COMPLETE SPINNING MILL, WHICH ONLY TOGETHER ARE CAPABLE OF MANUFACTURE, AND THERE IS NO INTERMEDIATE MARKETABLE PRODUCT PRODUCED. IN OUR VIEW, THIS ISSU E HAS BEEN SATISFACTORILY ANSWERED BY THE RECENT DECISION OF THIS COURT IN CIT V. SARAVANA SPG. MILLS (P) LTD. [2007] 293 ITR 201 . IN THAT CASE THIS COURT HAS HELD UNAMBIGUOUSLY THAT 'EACH MACHINE IN A SEGMENT OF A TEXTILE MILL HAS AN INDEPENDENT ROLE T O PLAY IN THE MILL AND THE OUTPUT OF EACH DIVISION IS DIFFERENT FROM THE OTHER.' DEALING WITH A RING FRAM E 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 PAR T OF THE INTEGRATED PROCESS OF MANUFACTURE OF YARN AND I S 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 AND DISTINCT FUNCTION OF EACH MACHINE. THU S, EACH MACHINE IN A TEXTILE MILL SHOULD BE TREATED INDEPENDENTLY AS SUCH AND NOT AS A MERE PART OF AN ENTIRE COMPOSITE MACHINERY OF THE SPINNING MILL. AS STATED ABOVE, IT CAN AT BEST BE CONSIDERED PART OF AN INTEGRATED MANUFACTURE PROCESS EMPLOYED IN A TEXTILE MILL. 15. MOVING ON TO THE ISSUE OF 'CURRENT-REPAIRS,' UN DER SECTION 31 OF THE ACT, THE DECISION OF THIS COURT I N SARAVANA SPG. MILLS (P) LTD. S CASE (SUPRA) IS AGAIN RELEVANT. THIS COURT HAS LAID DOWN THAT IN ORDER TO DETERMINE WHETHER A PARTICULAR EXPENDITURE AMOUNTS TO 'CURRENT REPAIRS' THE TEST IS 'WHETHER THE EXPENDITURE IS INCURRED TO 'PRESERVE AND MAINTAIN' AN 10 ITA NOS.2205 & 2206/MDS/2014 ALREADY EXISTING ASSET AND NOT TO BRING A NEW ASSET INTO EXISTENCE OR TO OBTAIN A NEW ADVANTAGE. FOR 'CURRENT REPAIRS' DETERMINATION, WHETHER EXPENDITUR E IS REVENUE OR CAPITAL IS NOT THE PROPER TEST.' IT I S OUR OPINION THAT THE ENTIRE TEXTILE MILL MACHINERY CANN OT BE REGARDED AS A SINGLE ASSET, REPLACEMENT OF PARTS OF WHICH CAN BE CONSIDERED TO BE FOR 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 SUCH AN OLD MACHINE WITH A NEW ONE WOULD CONSTITUTE THE BRINGING INTO EXISTENCE OF A NEW ASSET IN PLACE OF THE OLD ONE AND NOT REPAIR OF THE OLD AND EXISTING MACHINE. ALSO, A NEW ASSET IN A TEXTILE MILL IS NOT ONLY FOR TEMPORARY USE. RATHER IT GIVES THE PURCHASER AN ENDURING BENEFIT OF BETTER AND MORE EFFICIENT PRODUCTION OVER A PERIOD OF TIME. THUS, REPLACEMENT OF ASSETS AS IN THE INSTANT CASE CANNOT AMOUNT TO 'CURRENT REPAIRS'. THE DECISION IN SARAVANA SPG. MILLS (P) LTD S CASE (SUPRA) CLEARLY MENTIONS THAT REPLACEMENT OF A DERELICT RING FRAME BY A NEW ONE DOES NOT AMOUNT TO 'CURRENT REPAIRS'. FURTHER IN BALLIMAL NAVAL KISHORE'S CASE (SUPRA) THIS COURT HAS HELD THAT A NEW ASSET OR NEW/DIFFERENT ADVANTAGE CANNOT AMOUNT TO 'CURRENT REPAIRS', WHICH HAS BEEN SUBSEQUENTLY APPROVED IN THE SARAVANA SPG. MILLS (P) LTD.S CASE (SUPRA). FOR THESE REASONS, THE EXPENDITURE MADE BY THE ASSESSEE CANNOT BE ALLOWED AS A DEDUCTION UNDER SECTION 31 OF THE ACT. THE JUDGMENT OF THIS COURT IN THE SARAVANA SPG. MILLS (P) LTD S CASE (SUPRA) MENTIONS TWO EXCEPTIONS IN WHICH REPLACEMENT COULD AMOUNT TO CURRENT REPAIRS, NAMELY: ' WHERE OLD PARTS ARE NOT AVAILABLE IN THE MARKET (AS SEEN IN THE CASE OF CITV. MAHALAKSHMI TEXTILE MILLS LID. (AIR 1968 SC 101), OR + WHERE OLD PARTS HAVE WORKED FOR 50-60 YEARS.' 11 ITA NOS.2205 & 2206/MDS/2014 IN THE INSTANT CASE, THE ASSESSEE HAS NOT CLAIMED ANY OF THE ABOVE STATED EXCEPTIONS. THE SARAVANA SPG. MILLS (P) LTD S CASE (SUPRA) ALSO RESTRICTS THE SCOPE OF 'CURRENT REPAIRS' TO REPAIRS MADE TO MACHINERY, PLANT AND/OR FURNITURE. IN THIS CASE, REPLACEMENT OF MACHINE CAN AT BEST AMOUNT TO A REPAIR MADE TO THE PROCESS OF MANUFACTURE OF YARN. FURTHER THIS COURT HAS ALSO OBSERVED IN SARAVANA SPG. MILLS (P) LTD S CASE (SUPRA) THAT IF REPLACEMENT WAS HELD TO BE 'CURRENT REPAIR' IN SUCH CASES, SECT ION 31(I) WILL BE COMPLETELY REDUNDANT AND ABSURDITY WI LL CREEP IN BECAUSE REPAIR IMPLIES EXISTENCE OF A PART OF THE MACHINE WHICH HAS MALFUNCTIONED, WHICH IS IMPOSSIBLE IN THE CASE OF SUCH REPLACEMENT. THUS, THIS REPLACEMENT EXPENDITURE CANNOT BE SAID TO BE 'CURRENT REPAIRS' AFTER THE DECISION IN THE SARAVANA SPG. MILLS (P) LTD. S CASE (SUPRA). 16. GIVEN THAT SECTION 31 OF THE ACT IS NOT APPLICA BLE TO THE SAID EXPENDITURE OF THE ASSESSEE, THE NEXT ISSUE IS WHETHER IT CAN BE CONSIDERED 'REVENUE EXPENDITURE' OF THE NATURE ENVISAGED UNDER SECTION 37 OF THE ACT. THE SARAVANA SPG. MILLS (P) LTD S CASE (SUPRA) HOLDS THAT EXPENDITURE IS DEDUCTIBLE UNDER SECTION 37 ONLY IF IT (A) IS NOT DEDUCTIBLE UNDER SECTIONS 30-36, (B) IS OF A REVENUE NATURE, (C) IS INCURRED DURING THE CURRENT ACCOUNTING YEAR AND (D) IS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS. WE ARE SATISFIED THAT THE ASSESSEES' EXPENDITURE SATISFIES REQUIREMENTS (A), ( C) AND (D) AS STATED ABOVE. THE DISPUTE IS WITH RESPECT TO THE NATURE OF EXPENDITURE, THAT IS, WHETHER IT IS REVEN UE OR CAPITAL IN NATURE. 17. WE ARE OF THE OPINION THAT THE EXPENDITURE OF T HE ASSESSEE IN THIS CASE IS CAPITAL IN NATURE AND THER E IS SUFFICIENT JUDICIAL PRECEDENT TO SUPPORT THIS VI EW IN THE CASE OF TRAVANCORE COCHIN CHEMICALS LTD V. CLT [1977] 106 LTR 900 THIS COURT HELD THAT EXPENDITURE IS OF A CAPITAL NATURE WHEN IT AMOUNTS TO AN ENDURING ADVANTAGE FOR THE BUSINESS AND REPAIR IS DIFFERENT 12 ITA NOS.2205 & 2206/MDS/2014 FROM BRINGING A NEW ASSET FOR THE BUSINESS. FURTHER , IN LAKSHMIJI SUGAR MILLS (P) CO. V. CIT AIR 1972 SC 159 IT HAS BEEN HELD BY THIS COURT THAT BRINGING IN TO EXISTENCE A NEW ASSET OR AN ENDURING BENEFIT FOR TH E 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 CL EAR THEN THAT EXPENDITURE OF THE ASSESSEE HERE IS NOT O F A REVENUE NATURE AND THUS, CANNOT BE CLAIMED AS A DEDUCTION UNDER SECTION 37 OF THE ACT. 18. AS FAR AS RELIANCE ON THE HIGH COURT DECISION I N JANAKIRAM MILLS LTD S CASE (SUPRA) IS CONCERNED, THE SARAVANA SPG. MILLS (P) LTD S CASE (SUPRA) HAS CLEARLY SET ASIDE THE SAID JUDGMENT OF THE MADRAS HIGH COURT BY ITS FINDING ON THE SCOPE OF 'CURRENT REPAI RS' UNDER SECTION 31 OF THE ACT. IN CLT V. RAMARAJU SURGICAL COTTON MILLS [2007] 294. IIR 328, WHERE THIS COURT DECIDED ON THE VALIDITY OF THE MADRAS HIGH COURT JUDGMENT IN JANAKIRAM MILLS (SUPRA), THIS COURT CLARIFIED THAT THIS HIGH COURT JUDGMENT HAS BEEN SET ASIDE IN THE SARAVANA SPG. MILLS (P) LTD S CASE (SUPRA) MAINLY ON THE GROUND THAT SECTION 31 AND SECTION 37 OF THE ACT, OPERATE IN DIFFERENT SPHERES AND THE TESTS APPLICABLE TO SECTI ON 31 CANNOT BE READ INTO SECTION 37 OF THE ACT. FURTHER, EVEN IN THE RAMARAJU SURGICAL COTTON MILLS' CASE (SUPRA) WHERE THIS COURT DISTINGUISHED THE SARAVANA SPG. MILLS (P) LTD S CASE (SUPRA) ON THE GROUND THAT THAT APPEAL WAS WITH RESPECT TO DEDUCTION ONLY UNDER SECTION 37 OF THE ACT UNLIKE T HE SARAVANA SPG. MILLS (P.) LTD 5 CASE (SUPRA), THIS COURT SET ASIDE THE HIGH COURT JUDGMENT IN IANAKIRAM MILLS LTD. 5 CASE (SUPRA) AND REMITTED THE MATTER TO THE COMMISSIONER (APPEALS) TO DISPOSE OF THE MATTER IN ACCORDANCE WITH LAW. IN THE LIGHT OF THE OBSERVATIO NS MADE HEREIN ABOVE, IT IS THUS CLEAR THAT THE HIGH COURT DECISION IN IANAKIRAM MILLS LTS CASE (SUPRA) IS NOT GOOD LAW ON WHICH RELIANCE MAY BE PLACED. 13 ITA NOS.2205 & 2206/MDS/2014 19. CONSIDERATION OF THE DEFINITION OF 'ASSETS' AND 'BLOCK OF ASSETS' AND THE CONCEPT OF DEPRECIATION UNDER THE ACT IS NOT REQUIRED TO BE DECIDED UPON WHETHER THE EXPENDITURE INCURRED BY THE ASSESSEE IS A DEDUCTIBLE EXPENDITURE OR NOT. HENCE WE ARE NOT INCLINED TO DISCUSS THE SAME. 20. IT IS CLEAR ON RECORD THAT THE ASSESSEE HAS SOUGHT TO TREAT THE SAID EXPENDITURE DIFFERENTLY FOR THE PURPOSES OF COMPUTING ITS PROFIT AND FOR THE PURPOS E OF PAYMENT OF INCOME-TAX. THE SAID EXPENDITURE HAS BEEN TREATED AS AN ADDITION TO THE EXISTING ASSETS IN THE FORMER AND AS REVENUE EXPENDITURE IN THE LATTER . THOUGH ACCOUNTING PRACTICES MAY NOT BE THE BEST GUIDE IN DETERMINING THE NATURE OF EXPENDITURE, IN THIS CASE THEY ARE INDICATIVE OF WHAT THE ASSESSEE ITSELF THOUGHT OF THE EXPENDITURE IT MADE ON REPLACEMENT OF MACHINERY AND THAT THE CLAIM FOR DEDUCTION UNDER THE ACT WAS MADE MERELY TO DIMINISH THE TAX BURDEN, AND NOT UNDER THE BELIEF T HAT IT , WAS ACTUALLY REVENUE EXPENDITURE. 21. FOR THE REASONS AFORESAID, WE SET ASIDE THE IMPUGNED JUDGMENT OF THE HIGH COURT, THEREBY RESTORING THE JUDGMENT OF THE ASSESSING OFFICER DISALLOWING THE CLAIM OF DEDUCTION OF THE RESPONDENT. 7. THE ABOVE DECISION OF THE HONBLE SUPREME COURT IS SQUARELY APPLICABLE TO THE FACTS OF THE PRESENT CAS E. WE ALSO FIND THAT CO-ORDINATE BENCH IN THE CASE OF M/S.RAJN ARAYAN TEXTILES LTD. VS. ACIT IN ITA NO.1406/MDS/2012 DATE D 12.12.2012 CONSIDERED A SIMILAR SITUATION AND BY FO LLOWING THE SAID DECISION OF THE SUPREME COURT HELD THAT REPLAC EMENT OF 14 ITA NOS.2205 & 2206/MDS/2014 MACHINERY IN TEXTILE MILLS IS CAPITAL EXPENDITURE A ND NOT ALLOWABLE AS DEDUCTION UNDER SECTION 37 OF THE ACT. WHILE HOLDING SO, THE TRIBUNAL HELD AS UNDER:- 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURE OF Y ARN. DURING THE ASST. YEAR 1995-96, THE ASSESSEE REPLACE D ONE DRAW FRAME, TWO SPEED FRAMES, TWO RING FRAMES, TWO TRANSFORMERS, AND ONE USTER EVENNESS TESTER, TOTALI NG TO ` 62,96,685J-. THE SAID EXPENDITURE WAS CLAIMED AS REVENUE EXPENDITURE ALLOWABLE UNDER SEC.37 OF THE A CT.. THE ASSESSING OFFICER TREATED THE SAID EXPENDITURE AS CAPITAL EXPENDITURE AND ALLOWED DEPRECIATION. THE ASSESSEE SUCCEEDED BEFORE THE TRIBUNAL AND BEFORE T HE HIGH COURT AND THE MATTER REACHED THE HON'BLE SUPRE ME COURT IN CIVIL APPEAL NO.922J2006 AND OTHER BATCH O F APPEALS. 3. BEFORE THE HON'BLE SUPREME COURT BOTH THE PARTIE S SUBMITTED THAT THE MATTER IS SQUARELY COVERED BY TH E JUDGMENT OF DIVISION BENCH OF HON'BLE SUPREME COURT IN THE CASE OF CIT V. RAMARAJU SURGICAL COTTON MILLS & OTHERS REPORTED IN 294 ITR 328. THE HON'BLE SUPREME COURT BY ITS ORDER DATED 13.1.2009 IN CIVIL APPEAL NO.922 OF 2006 ACCEPTED THE CONTENTIONS OF THE PARTIES AND THE SUBMISSIONS MADE BEFORE IT , REMITTED THE APPEA L TO THE FILE OF THE COMMISSIONER OF INCOME TAX (APPEALS ) WITH A DIRECTION TO DISPOSE OF THE MATTER IN ACCORDANCE WITH LAW AND IN TERMS OF DIRECTIONS GIVEN IN THE JUDGMENT IN THE CASE OF CIT V. RAMARAJU SURGICAL COTTON MILLS & OTHERS(SUPRA). THE HON'BLE SUPREME COURT IN THE CAS E OF CIT V. RAMARAJU SURGICAL COTTON MILLS & OTHERS HELD AS UNDER :- '4. THERE ARE NUMBER OF TESTS WHICH ARE REQUIRED TO BE CONSIDERED WHILE DECIDING WHETHER THE EXPENDITURE W AS REVENUE OR CAPITAL IN NATURE. NUMBER OF JUDGEMENTS HAVE BEEN CITED BEFORE US IN THAT REGARD. HOWEVER, IN TH E ABSENCE OF THE REQUISITE DETAILS REGARDING THE PROD UCTION CAPACITY REMAINING CONSTANT EVEN AFTER REPLACEMENT, THE MATTER NEEDS TO BE REMITTED TO THE C!T(A). THER E IS ONE MORE REASON WHY WE ARE INCLINED TO REMIT THE MATTER . AS STATED ABOVE, THE IMPUGNED JUDGMENT OF THE MADRAS H IGH COURT IN THE CASE OF JANAKIRAM MILLS LTD. (SUPRA) H AS BEEN 15 ITA NOS.2205 & 2206/MDS/2014 SET ASIDE BY THIS COURT AS THERE WAS CONFUSION BETW EEN THE TESTS TO BE APPLIED IN RESPECT OF S.31 VIS-A-VIS TH E TEST TO BE APPLIED IN CASE OF S.37 OF THE !T ACT. WITHOUT EXPR ESSING ANY OPINION ON THE MERITS OF THE CASE WE REMIT THE MATT ER TO C!T(A) WHO WILL DECIDE THE QUESTION IN ACCORDANCE WITH LAW.' MEANWHILE, THE HON'BLE SUPREME COURT IN THE CASE OF SRI MANGAYARKARASI SPINNING MILLS (P) LTD. (315 ITR 114 ) HELD THAT EXPENDITURE OF AN ASSESSEE FOR REPLACEMENT OF PARTS OF TEXTILE MILLS FOR SPINNING YARN IS NOT REVENUE EXPENDITURE UNDER SEC.37 OF THE I.T.ACT. 4. THE APPEAL OF THE ASSESSEE WAS TAKEN UP BY THE COMMISSIONER OF INCOME TAX (APPEALS) AS DIRECTED BY THE HON'BLE SUPREME COURT TO DECIDE THE ISSUE IN ACCORD ANCE WITH LAW AND IN TERMS OF DIRECTIONS IN THE CASE OF CIT V . RAMARAJU SURGICAL COTTON MILLS & OTHERS (SUPRA). 5. THE COUNSEL FOR THE ASSESSEE SUBMITTED BEFORE TH E COMMISSIONER OF INCOME TAX (APPEALS) THAT IN VIEW O F THE DECISION IN THE CASE OF CIT V. RAMARAJU SURGICAL CO TTON MILLS& OTHERS (SUPRA) AND SINCE THERE IS NO INCREASE IN PR ODUCTION CAPACITY IN ASSESSEE'S CASE, THE EXPENDITURE INCURR ED BY THE ASSESSEE IS REVENUE AND NOT CAPITAL EXPENDITURE. 6. THE DEPARTMENTAL REPRESENTATIVE SUPP ORTED THE ORDERS OF THE LOWER AUTHORITIES. 7. THE COMMISSIONER OF INCOME TAX (APPEALS), AFTER CONSIDERING THE DECISIONS OF HON'BLE SUPREME COURT IN THE CASE OF CIT V. RAMARAJU SURGICAL COTTON MILLS& OTHERS (S UPRA), SRI MANGAYARKARASI MILLS (P) MILLS LTD. (315 ITR 114) ( S.C) (SUPRA), CIT V. SARAVANA SPINNING MILLS (P) LTD (211 CTR 281 )(S.C) ETC., HELD THAT THE EXPENDITURE INCURRED ON REPLACEMENT O F MACHINERY IS CAPITAL EXPENDITURE. THE COMMISSIONER OF INCOME TAX (APPEALS) ALSO OBSERVED THAT THE COUNSEL FOR THE AS SESSEE HIMSELF ADMITTED THAT RING FRAMES ATTRIBUTES TO THE INCREASE IN PRODUCTION CAPACITY ON ACCOUNT OF INCREASE IN SPIND LEAGE. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL PLACED ON RECORD AND THE JUDGMENTS RELIED UPON. WE FIND THAT ON IDENTICAL FACTS, THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF THE KUMARAN MILLS LTD. V. ACIT IN IT A NO.754/MDS/2012 FOR THE ASST. YEAR 1994-95, DATED 1 2 SEPT 2012, HELD THAT REPLACEMENT OF DRAW FRAMES ARE CAPI TAL EXPENDITURE NOT ALLOWABLE AS DEDUCTION UNDER SEC.37 OF THE ACT. 16 ITA NOS.2205 & 2206/MDS/2014 THE CO-ORDINATE BENCH HELD AS UNDER :- '5. WE HAVE HEARD BOTH THE SIDES, PERUSED THE RECOR DS AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. T HE ONLY ISSUE FOR ADJUDICATION BEFORE US IS WHETHER THE EXP ENDITURE INCURRED FOR THE PURPOSE OF REPLACEMENT OF DRAW FRA ME IS REVENUE EXPENDITURE OR CAPITAL EXPENDITURE. THE LEA RNED CIT(APPEALS) BY CONSIDERING THE ENTIRE FACTS OF THE CASE AND ALSO THE DECISIONS OF VARIOUS HIGH COURTS AND THE H ON'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 MIL LS LTD. (SUPRA) HAS HELD THAT REPLACEMENT OF DRAW FRAME IS A CAPITAL EXPENDITURE. FOR THAT PROPOSITION THE HON'B LE SUPREME COURT HAS RELIED ON THE DECISIONS IN THE CA SE OF TRAVANCORE COCHIN CHEMICALS LTD. V. CIT (106 ITR 90 0) (SC) AND LAKSHMIJI SUGAR MILLS P. CO. V. CIT AIR 19 72 SC 159 AND OBSERVED THAT 'IT HAS BEEN HELD BY THIS COU RT THAT BRINGING INTO EXISTENCE A NEW ASSET OR AN ENDURING BENEFIT FOR THE ASSESSEE AMOUNTS TO CAPITAL EXPENDI TURE. WE HAVE ALREADY EXPLAINED WHY REPLACEMENT, IN THIS CASE, AMOUNTS TO BRINGING INTO EXISTENCE A NEW ASSE T AND ALSO AN ENDURING BENEFIT FOR THE ASSESSEE IT IS CLEAR THEN THAT THE EXPENDITURE OF THE ASSESSEE HERE IS N OT 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 CAS E OF CIT, MADURAI V. MADURA COATS (2012) 205 TAXMAN 357 (MADR AS) HAS OBSERVED AS UNDER :- '11. WHEN THE TAX CASE APPEALS CAME UP FOR CONSIDER ATION IT IS SUBMITTED BY THE LEARNED COUNSEL FOR THE APPELLANT/REVENUE THAT WITH REGARD TO THE SUBSTANTI AL QUESTION OF LAW 1 AND 2 THEY ARE COVERED AS PER THE JUDGMENT OF THIS COURT DATED 25-04-2011 IN TAX CASE (APPEALS) NOS. 71 AND 72 OF 2008. 12. IN VIEW OF THE ABOVE, FOLLOWING THE SAME, THE S UBSTANTIAL QUESTION OF LAW 1 AND 2 RAISED IN THIS TAX CASE APPEAL ARE ANSW ERED AGAINST THE ASSESSEE AND IN FAVOUR OF THE REVENUE. 13. WITH REGARD TO THE THIRD SUBSTANTIAL QUESTION O F LAW, IT IS SUBMITTED BY THE LEARNED COUNSEL FOR THE APPELLANT THAT WHEN EACH OF THE MACHINERY IN QUESTION SUCH AS RING FRAM ES, DRAW FRAMES AND SPEED FRAME IS PURCHASED FOR THE FI RST TIME, THEN IT IS A CAPITAL ASSET, ON WHICH DEPRECIA TION SHOULD 17 ITA NOS.2205 & 2206/MDS/2014 BE GRANTED. WHEREAS, IT IS SUBMITTED THAT THE SALE OF A WORN OUT MACHINERY AND REPLACEMENT THEREOF BY NEW MACHIN ERY CAN ONLY BE TREATED AS REDUCTION AND ADDITION TO TH E 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 M AY HAVE HAD THE EFFECT OF TREATING THE REPLACEMENT OF MACHINERY AS REPLACEMENT OF PARTS OF A LARGER WHOLE AND THUS TRE ATED AS REVENUE EXPENDITURE AND ONCE THE CONCEPT OF BLOCK O F ASSETS HAS BEEN BROUGHT IN BY THE PARLIAMENT FROM THE ASSE SSMENT YEAR 1988-89 , WHETHER THE MILL IS AN INTEGRATED WH OLE OR NOT, WHETHER THE REPLACEMENT OF MACHINES RESULTED IN INC REASED CAPACITY OR NOT, WILL HAVE NO BEARING AND WHEN ANY ITEM BELONGING TO THE BLOCK IS REMOVED, ITS VALUE IS RED UCED AND IF ANY NEW ITEM COMES IN ITS PLACE, ITS VALUE IS ADDED TO THE BLOCK. IN VIEW OF THE ABOVE, IT IS SUBMITTED THAT T HE THIRD SUBSTANTIAL QUESTION OF LAW IS ALSO COVERED AS PER THE JUDGMENT OF THIS COURT DATED 25.04.2011 IN TAX CASE (APPEALS) NOS. 71 & 72 OF 2008. IN VIEW OF THE SAID SUBMISSION MADE BY THE LEARNED COUNSEL FOR THE APPE LLANT, WE HOLD THAT THE THIRD QUESTION OF LAW IS ALSO ANSW ERED IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE.' 7. IN VIEW OF THE DECISIONS OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT V. RAMARAJU SURGICAL COTTON MI'S LT D. (SUPRA), CIT V. SRI MANGAYARKARASI MILLS P. LTD. (S UPRA) AND THE DECISION OF THE HONOURABLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT, MADURAI V. MADURA COATS (SUPRA), W E FIND NO INFIRMITY IN THE ORDER PASSED BY THE LEARNED CIT(APPEALS). HIS ORDER IS ACCORDINGLY CONFIRMED AN D THE APPEAL OF THE ASSESSEE IS DISMISSED.' THEREFORE, FOLLOWING THE DECISION OF THE HON'BLE SU PREME COURT IN THE CASE OF CIT V. SRI MANGAYARKARASI SPINNING M ILLS (P) LTD. (SUPRA) AND THE DECISION OF THE CO-ORDINATE BENCH, WE HOLD THAT REPLACEMENT OF MACHINERY IN TEXTILE MILLS IS CAPITA L EXPENDITURE AND NOT ALLOWABLE AS DEDUCTION UNDER SECTION 37 OF THE I.T.ACT. 8. RESPECTFULLY FOLLOWING THE SAID DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. SRI MANGAYARKA RASI MILLS P.LTD. (SUPRA), AND ALSO THE DECISION OF THI S TRIBUNAL CITED ABOVE, WE REJECT THE GROUNDS RAISED BY THE AS SESSEE. 18 ITA NOS.2205 & 2206/MDS/2014 9. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH AUGUST, 2015. SD/- SD/- ( # ) ( & (# ) ( CHANDRA POOJARI ) ( CHALLA NAGENDRA PRASAD ) * / ACCOUNTANT MEMBER ( * / JUDICIAL MEMBER ( /CHENNAI, , /DATED 19 TH AUGUST, 2015 SOMU ./ 0/ /COPY TO: 1. APPELLANT 2. RESPONDENT 3. 1 () /CIT(A) 4. 1 /CIT 5. / 5 /DR 6. /GF .