Sri Balasubramania Mills Limited, Coimbatore V. ACIT, Coimbatore

ITA 476/CHNY/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64482 (ITAT-CHENNAI)
• Duration Of Justice: 8 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-11-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 05-11-2012
• Assessment Year: 1994-1995
• Appeal Filed On: 05-03-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ANIRUDH RAI
• Assessee Lawyers: K BALASUBRAMANIAM
• Section: 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI V. DURGA RAO, JUDICIAL MEMBER I.T.A. NO. 476/MDS/2012 (ASSESSMENT YEAR : 1994-95) M/S SRI BALASUBRAMANIA MILLS LTD., 483, KAMARAJ ROAD, UPPILIPALAYAM, COIMBATORE. PAN : AADCS1887K (APPELLANT) V. THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE II(1), RACE COURSE ROAD, COIMBATORE. (RESPONDENT) APPELLANT BY :SHRI K. BALASUBRAMANIAM, CA RESPONDENT BY :SHRI ANIRUDH RAI, CIT-DR DATE OF HEARING : 05.11.2012 DATE OF PRONOUNCEMENT : 05.11.2012 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : IN THIS APPEAL FILED BY THE ASSESSEE, ITS GRIEVANC E IS THAT ITS CLAIM FOR EXPENDITURE INCURRED TOWARDS REPLACEMENT OF MACHINERY WAS NOT ALLOWED BY THE ASSESSING OFFICER AND THIS WAS C ONFIRMED BY THE CIT(APPEALS). AS PER THE ASSESSEE, THE LOWER AUTHO RITIES FAILED TO APPRECIATE THAT EACH MACHINE WHICH WAS REPLACED ONL Y HELPED TO I.T.A. NO. 476/MDS/12 2 MAINTAIN THE EXISTING PRODUCTION AND QUALITY LEVELS . AS PER THE ASSESSEE, THE REPLACEMENT DID NOT RESULT IN ANY INC REASE IN PRODUCTION CAPACITY. 2. FACTS APROPOS ARE THAT ASSESSEES CLAIM FOR REPL ACEMENT OF SIMPLEX (SPEED FRAMES), DRAW FRAMES (AUTO LEVELER) AND CARDS OF ` 138.30 LAKHS, WAS ORIGINALLY DISALLOWED BY THE ASSE SSING AUTHORITY. THEREAFTER ASSESSEE MOVED IN APPEAL BEFORE CIT(APPE ALS), WHO HELD THE CLAIM AS ALLOWABLE. VIEW TAKEN BY THE CIT(APPE ALS) WAS, THEREAFTER, CONFIRMED BY THIS TRIBUNAL AND LATER BY THE HONBLE JURISDICTIONAL HIGH COURT. HOWEVER, IN FURTHER APP EAL FILED BY THE REVENUE BEFORE HONBLE APEX COURT, THE MATTER WAS R EMITTED BACK TO THE FILE OF THE ASSESSING OFFICER WITH THE FOLLOWIN G DIRECTIONS:- IN THESE APPEALS THE RESPECTIVE ASSESSEES HAD CLAIM ED DEDUCTION UNDER SECTION 31(I) OF THE ACT TREATING T HE REPLACEMENT AS REPAIR AND IN THE ALTERNATIVE AS BUS INESS EXPENDITURE ALLOWABLE UNDER SECTION 37 OF THE ACT. INSOFAR AS THE CLAIM OF THE ASSESSEES UNDER SECTION 31(I) IS CONCERNED, THEIR CLAIM STANDS REJECTED IN VIEW O F THE AFOREMENTIONED JUDGMENT OF THIS COURT IN THE CASE O F SARAVANA SPINNING MILLS (P) LTD. (SUPRA). HOWEVER, INSOFAR AS THE CLAIM OF THE ASSESSEES UNDER SECTION 37 IS CONCERNED, THE VI EW OF AND IN TERMS OF THE AFOREMENTIONED ORDER OF THIS COURT IN THE CASE OF RAMARAJU SURGICAL COTTON MILLS, THE CASE IS REMITTE D TO THE COMMISSIONER (APPEALS) TO DECIDE THE QUESTION IN AC CORDANCE WITH LAW. I.T.A. NO. 476/MDS/12 3 THEREAFTER THE MATTER WAS ONCE AGAIN TAKEN UP BY TH E CIT(APPEALS) WHO THIS TIME AROUND HELD THAT THE CLAIM COULD NOT BE ALLOWED, RELIANCE WAS PLACED ON THE DECISION OF HONBLE APEX COURT IN THE CASE OF CIT V. SRI MANGAYARKARASI MILLS P. LTD.(315 ITR 114). CIT(APPEALS). AS PER THE LD. CIT(APPEALS) THE ISSU E WHETHER SUCH A CLAIM COULD BE CONSIDERED AS ONE FOR CURRENT REPAIR S, ALSO STOOD DECIDED AGAINST THE ASSESSEE BY THE HONBLE APEX CO URT IN THE CASE OF CIT V SARAVANA SPINNING MILLS P. LTD. (293 ITR 201) . AS FOR THE QUESTION WHETHER IT COULD BE CONSIDERED AS REVENUE OUTGO, THE CIT(APPEALS) HELD THAT IN VIEW OF THE DECISION OF H ONBLE APEX COURT IN THE CASE OF SRI MANGAYARKARASI MILLS P. LTD. (SUPRA), THIS ALSO COULD NOT BE ALLOWED. 3. NOW BEFORE US, LEARNED A.R., STRONGLY ASSAILING THE ORDERS OF LOWER AUTHORITIES, SUBMITTED THAT MACHINES, WHICH W ERE MORE THAN FIFTY YEARS OLD, WERE REPLACED AND THERE WAS NO INCREASE IN CAPACITY ON ACCOUNT OF SUCH REPLACEMENT. HE, THEREFORE, SUBMIT TED THAT EXPENSES OUGHT HAVE BEEN ALLOWED AS REVENUE OUTGO. 4. PER CONTRA, LEARNED D.R. SUPPORTED THE ORDERS OF AUTHORITIES BELOW. I.T.A. NO. 476/MDS/12 4 5. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL SUBMISSIONS. CIT(APPEALS) HAD RECONSIDERED THE ISSUE BASED ON TH E DIRECTIONS OF HONBLE APEX COURT IN CIVIL APPEAL NO.3545/07. UND ISPUTEDLY, ASSESSEE HAD REPLACED SIMPLEX (SPEED FRAMES), DRAW FRAMES (AUTO LEVELER) AND CARDS. EXPENDITURE INCURRED WERE FOR REPLACEMENTS. THESE COULD HAVE BEEN CONSIDERED AS REPAIRS ONLY IF ASSESSEE COULD PROVE THAT THE REPLACED PARTS WERE NOT AVAILABLE IN MARKET OR THAT THE OLD PARTS HAD WORKED FOR MORE THAN FIFTY YEARS. TH OUGH THE ASSESSEE HAS MENTIONED IN THE GROUND THAT THE PARTS WERE NOT AVAILABLE DUE TO ADVANCEMENT IN TECHNOLOGY OVER A PERIOD OF FORTYFIV E YEARS, NOTHING WAS BROUGHT ON RECORD TO SHOW THAT THE REPLACEMENTS WERE OF PARTS OF MACHINERY WHICH WERE MORE THAN 50 YEARS OLD. ON TH E OTHER HAND, ASSESSEE ITSELF HAS SUBMITTED THAT ITEMS REPLACED W ERE SIMPLEX (SPEED FRAMES), DRAW FRAMES (AUTO LEVELER) AND CARD S. EACH OF THESE, WHEN INDEPENDENTLY CONSIDERED, WERE NOT PART S OF ANY MACHINERY, BUT A MACHINERY BY ITSELF. FURTHER, HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. MADURA COATS IN TC A 322 TO 324 OF 2008 DATED 22.12.2011 HAS CLEARLY HELD THAT EXPENDI TURE ON REPLACEMENT OF MACHINERY COULD NOT BE ALLOWED AS RE VENUE OUTGO, AFTER THE ENACTMENT OF THE CONCEPT OF BLOCK OF ASSE TS FROM ASSESSMENT YEAR 1988-89. THEIR LORDSHIP HELD WHETH ER A MILL WAS I.T.A. NO. 476/MDS/12 5 INTEGRATED WHOLE OR NOT, AND WHETHER REPLACEMENT OF MACHINERY RESULTED IN INCREASE IN CAPACITY OR NOT, WOULD HAVE NO BEARING. IF AN ITEM BELONGING TO THE BLOCK WAS REMOVED, ITS VALUE WAS REDUCED AND IF ANY NEW ITEM CAME IN ITS PLACE, ITS VALUE HAD TO BE ADDED TO THE BLOCK. THUS, IN OUR OPINION, LD. CIT(APPEALS) WAS JUSTIFIED IN HOLDING THAT THE EXPENDITURE CLAIMED BY THE ASSESSEE COULD NOT BE ALLOWED AS REVENUE OUTGO. NO INTERFERENCE IS CALLED FOR. 6. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS D ISMISSED. THE ORDER WAS PRONOUNCED IN THE COURT ON MONDAY, TH E 5 TH OF NOVEMBER, 2012, AT CHENNAI. SD/- SD/- (V.DURGA RAO) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 5 TH NOVEMBER, 2012. KRI. COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT(A)-I, COIMBATORE (4) CIT-I, COIMBATORE (5) D.R. (6) GUARD FILE