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Income Tax Appellate Tribunal, ‘A’ BENCH, CHENNAI [CAMP: COIMBATORE]
Before: SHRI N.R.S. GANESAN & SHRI ABRAHAM P. GEORGE
आदेश /O R D E R
PER BENCH: All the appeals filed by the different assessees are directed against the respective orders of the Commissioner of Income Tax (Appeals)-1, Coimbatore. In the case of first assessee, the appeals are filed for the assessment years 1993-94, 1994-95, 1998-99, 2005-06, 2006-07, 2007-08 and 2008-09 and in the case of second assessee, the appeal is for the assessment year 2006-07. Since common issue arises for consideration in all these appeals, we heard these appeals together and disposing of the same by this common order.
The issue arises for consideration is with regard to cost of replacement of machineries in the spinning mills.
Shri K. Ravi, the Ld.counsel for the assessees, submitted that Madras High Court in its judgment dated 24.07.2013 in the assessee's own case, directed the CIT(Appeals) to consider whether there was any increase in the production capacity after replacement of machineries. Inspite of this specific direction of the High Court, according to the Ld. counsel, the CIT(Appeals) has not considered the increase in the capacity after replacement of machineries. The Ld.counsel submitted that the matter may be remanded back to the file of the Assessing Officer for reconsideration.
On the contrary, Sh. Pathlavath Peerya, the Ld. Departmental Representative, submitted that the High Court at para 17 of its judgment, directed the CIT(Appeals) to consider the judgments of Apex Court in CIT v. Ramaraji Surgical Cotton Mills (2007) 294 ITR 328 and in CIT v. Sri Mangayarkarasi Mills Pvt. Ltd. 2009-TIOL-86-SC-II and to consider the case on merit, therefore, it need not be remanded back to the file of the Assessing Officer. The Ld. D.R. has also placed his reliance on the judgment of Madras High Court in CIT v. Madura Coats (2012) 19 taxmann.com 74.
We have considered the rival submissions on either side and perused the relevant material available on record. In the earlier round of litigation, the Madras High Court specifically considered the judgments of Apex Court in the case of CIT v. Ramaraju Surgical Cotton Mills (2007) 294 ITR 328. At para 14 of its judgment, the Madras High Court observed as follows:-
“14. Keeping the decisions referred to above, one can detect that in considering the claim of the assessee, the decision must be guided by business prudency of the necessity or expediency which compel the assessee to carry on such repairs/ replacement and if this repair ultimately has gone in for bettering its business profits in the nature of increasing its profits, as held by the Supreme Court in the case of CIT v. Ramaraju Surgical Cotton Mills reported in (2007) 294 ITR 328 (SC) through increase in the production capacity, then the outlay, not being just to carry on the business to earn profit out of its existence, but to enlarge its profit- earning capacity, the expenditure may fall for consideration under the head of “capital expenditure”. But, whether the expenditure in question has no such ingredient of increasing its production capacity, expenditure would necessarily fall under the head of “revenue expenditure”.”
Subsequently at para 17, the Madras High Court has also considered the judgment of Apex Court in Ramaraju Surgical Cotton Mills (supra) and in Sri Mangayarkarasi Mills Pvt. Ltd. (supra).
Thereafter the matter was remanded back to the file of the CIT(Appeals) to consider the case on merit. In view of specific finding of the Madras High Court at para 14, this Tribunal is of the considered opinion that the CIT(Appeals) is bound to record his finding whether there was increase in production capacity after replacement of machineries. Since the CIT(Appeals) has not considered the direction of the Madras High Court, this Tribunal is of the considered opinion that the matter has to be remanded back to the file of the CIT(Appeals) and not to the file of the Assessing Officer. Accordingly, the order of the CIT(Appeals) is set aside and the issue of cost of replacement of machineries is remitted back to the file of the CIT(Appeals). The CIT(Appeals) shall consider the matter afresh in the light of the judgment of the Madras High Court in the assessee’s own case (supra) and thereafter decide the issue in accordance with law, after giving a reasonable opportunity to the assessee.
In the result, all the appeals filed by the assessee are allowed for statistical purposes.
Order pronounced and dictated in the open court on 18th January, 2017 at Coimbatore.