PRINCIPAL COMMISSIONER OF vs. M/S.K.P.R. SPINNINNING MILLS

TCA/649/2017HC Madras25 August 2022Bench: Hon`ble Mr Justice R. MAHADEVAN4 pages

AI SummaryWithdrawn

What did the High Court hold?

The High Court of Judicature at Madras did not decide the substantial questions of law on merits. The learned Standing Counsels for the appellant/Revenue brought to the court's notice Circular No. 17/2019 dated August 8, 2019, issued by the Central Board of Direct Taxes (CBDT). This circular stipulates that appeals shall not be filed or pursued before the High Court if the tax effect does not exceed Rs. 1,00,00,000/-. The Revenue submitted that the tax effect in the present appeal was below this threshold limit. Consequently, the High Court dismissed the appeal as withdrawn, keeping the substantial questions of law open for determination in an appropriate case. No costs were awarded.

What were the facts?

The Revenue, represented by the Principal Commissioner of Income Tax, filed a Tax Case Appeal before the High Court of Judicature at Madras. The appeal challenged an order dated February 14, 2017, passed by the Income Tax Appellate Tribunal (ITAT), 'B' Bench, Chennai. This order pertained to the assessment year 2005-06 and concerned M/s. K.P.R. Spinning Mills (P) Ltd. (now K.P.R. Mills Limited). The core of the dispute involved the treatment of expenses incurred on the replacement of textile machinery. The Revenue's appeal was filed under Section 260A of the Income Tax Act, 1961.

What were the issues?

1. Whether the Appellate Tribunal was correct in holding the cost of textile machinery replaced as revenue expenses, without considering the provisions of Section 31(1) read with its Explanation, introduced effective from April 1, 2004, and applicable to the assessment year 2005-06? (Assessee's contention: The Tribunal correctly treated the expenses as revenue. Revenue's contention: The Tribunal erred by not considering Section 31(1) and its Explanation, which would render the expenses capital in nature). 2. Whether the ITAT was right in not following the decisions of the Hon'ble Supreme Court in CIT Vs Saravana Spinning Mills (2007) 293 ITR 201 and Sri Mangayarkarasi Mill Pvt. Ltd. (2009) 315 ITR 114, which established that machinery in a textile mill is considered independent and replacement expenses are not revenue expenses? (Assessee's contention: The Tribunal's decision aligns with established principles. Revenue's contention: The Tribunal failed to follow binding Supreme Court precedents regarding the treatment of machinery replacement expenses).

Which sections of the Income-tax Act were involved?

Section 260A,Section 31(1)

AI-generated summary — verify with the full judgment below

T.C.A.No.649 of 2017 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED 25.08.2022 CORAM THE HON'BLE Mr. JUSTICE R. MAHADEVAN AND THE HON'BLE Mr. JUSTICE MOHAMMED SHAFFIQ Tax Case Appeal No.649 of 2017 The Principal Commissioner of Income Tax No.63, Race Course Road Coimbatore

.. Appellant Vs. M/s.K.P.R.Spinning Mills (P) Ltd (Now known as K.P.R.Mills Limited) 9, A.K.S.Nagar, Thadagam Road Coimbatore 641 001 PAN : AAB CK 5208 N .. Respondent Tax Case Appeal filed under Section 260A of the Income Tax Act, 1961 against the order dated 14.02.2017 passed by the Income Tax Appellate Tribunal, 'B' Bench, Chennai, in I.T.A.No.1873/Mds/2016. For Appellant : Mr.M.Swaminathan Mrs.V.Pushpa

Standing Counsels For Respondent : Mr.S.Sridhar 1/4 https://www.mhc.tn.gov.in/judis T.C.A.No.649 of 2017 J U D G M E N T (Judgment was delivered by R. MAHADEVAN, J.) This tax case appeal has been filed by the appellant/Revenue, calling in question the correctness of the order dated 14.02.2017 passed by the Income Tax Appellate Tribunal, 'B' Bench, Chennai, in I.T.A.No.1873/Mds/2016, relating to the assessment year 2005-06, by raising the following substantial questions of law : “1. Whether the Appellate Tribunal was correct in holding the cost of textile machinery replaced as Revenue expenses, without considering the provisions of Section 31(1) read with Explanation thereto introduced with effect from 01.04.2004 and applicable to the present assessment year 2005-06? 2. Whether the ITAT was right in not following the decisions of the Hon'ble Supreme Court in the case of CIT Vs Saravana Spinning Mills (2007) 293 ITR 201 and Sri Mangayarkarasi Mill Pvt. Ltd. (2009) 315 ITR 114 which laid down the principle that machinery in a textile mill has to be considered as independent machinery, not entitled to treatment of expenses on replacement thereof as Revenue expenses?” 2. When the matter was taken up for consideration, the learned Standing Counsels for the appellant/Revenue brought to the notice of this court the Circular No.17/2019 dated 08.08.2019, issued by the Central Board Direct Taxes, wherein, it is stipulated that appeal shall not be filed/pursued by the 2/4 https://www.mhc.tn.gov.in/judis T.C.A.No.649 of 2017 Department before the High Court in cases where the tax effect does not exceed Rs.1,00,00,000/- (Rupees One Crore). It is also submitted that the tax effect in this appeal is less than the threshold limit. 3. In the light of the aforesaid submissions made by the learned Standing Counsels for the appellant/Revenue, the present appeal, wherein, the tax effect is said to be less than the monetary limit imposed, is dismissed as withdrawn, keeping open the substantial questions of law for determination in an appropriate case. No costs. [R.M.D,J.] [M.S.Q, J.] 25.08.2022 Internet : Yes gya To 1.The Income Tax Officer Company Ward-I, Coimbatore 2.The Commissioner of Income Tax (Appeals)-I Coimbatore 3.The Income Tax Appellate Tribunal 'B' Bench, Chennai R. MAHADEVAN, J. AND 3/4 https://www.mhc.tn.gov.in/judis T.C.A.No.649 of 2017 MOHAMMED SHAFFIQ, J. gya Tax Case Appeal No.649 of 2017 25.08.2022

4/4 https://www.mhc.tn.gov.in/judis

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