SRI SHANMUGAVEL MILLS (P) LTD.,TIRUPPUR vs. ADDL. CIT, TIRUPPUR

ITA 1328/CHNY/2013Status: DisposedITAT Chennai20 January 2015AY 2006-074 pages

AI SummaryRemanded

What did the Tribunal hold?

The Tribunal set aside the order of the CIT(A) and restored the matter to the Assessing Officer. The Assessing Officer was directed to ascertain the facts regarding the replaced machinery and allow the claim if it involved introducing compact spinning technology.

What were the facts?

The assessee claimed expenditure on modernization and replacement of gadgets as revenue expenditure. The CIT(A) disallowed this claim. The assessee argued that an identical issue for a subsequent assessment year was set aside to the Assessing Officer by the Tribunal.

What were the issues?

Whether expenditure incurred on modernization and replacement of gadgets is revenue or capital expenditure, and the need for factual verification by the Assessing Officer.

Which sections of the Income-tax Act were involved?

Not specified

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “A” BENCH, CHENNAI

Before: SHRI B.R. BASKARAN & SHRI VIKAS AWASTHY

For Appellant: Shri. T. Banusekar, C.A

For Respondent: Smt. Ruby George, IRS, CIT

आदेश / O R D E R

PER B.R. BASKARAN, ACCOUNTANT MEMBER The assessee has filed this appeal challenging the order dated 28.03.2013 passed by learned Commissioner of Income Tax (Appeals)- II, Coimbatore and it relates to the assessment year 2006-2007. The I.T.A.No.1328 /Mds/2013 :- 2 -: . assessee is aggrieved by the decision of learned Commissioner of Income Tax (Appeals) in disallowing the expenditure incurred towards modernization and replacement of gadgets as revenue expenditure.

The learned counsel appearing for the assessee submitted that identical disallowances made in the assessee’s own case for the assessment year 2007-2008 came up before the Co-ordinate bench of the Tribunal and the Tribunal, vide its order dated 11th July, 2013 passed in has set aside the matter to the file of the Assessing Officer with certain directions. The learned counsel further submitted that the Tribunal had passed a combined order against the appeal filed by the assessee as well as M/s. Adisankara Spinning Mills P. Ltd. The Revenue has preferred an appeal against the common order dated 11th July, 2013 of the Tribunal referred above before the Hon’ble Madras High Court. The Hon’ble High Court has confirmed the order of the Tribunal in remitting back the matter to the Assessing Officer to ascertain the facts in respect of replaced machinery ie., auto-coner, comber and lap former etc., The learned Authorised Representative prayed that the issue contested in the present appeal may be set aside to the file of the Assessing Officer.

I.T.A.No.1328 /Mds/2013 :- 3 -: . 3. The learned Departmental Representative did not disagree with the fact submitted by the learned Authorised Representative.

We have gone through the order dated 11th July, 2013 passed 4. by the Tribunal in the assessee’s own case. We noticed that the Tribunal has restored an identical issue to the file of the Assessing Officer with the following directions

“8. However, on going through the assessment orders in both these cases, we find that the Assessing Officer has given a finding that the assessee has furnished the list of machinery as part of the audit report in Form 3CD and such machinery comprises of auto- coner, comber and lap former. Similarly, the Commissioner of Income Tax (Appeals) also has given a finding that the assessee has purchased new machineries such as auto-coner, comber and lap former. But the assessee’s submission was that it had replaced conventional drafting system with new technology called “compact spinning” and this drafting system is situated in the ring frames. It was the contention that this compact system is a single piece gadget and this is fixed to each spindle. Therefore, the Assessing Officer has to ascertain as to what is the machinery that was replaced by the assessee whether it was auto-coner, comber and lap former or the compact spinning consisting of gadgets fitted to each spindle within the ring frames. We direct the Assessing Officer to ascertain these facts and allow the claim of the assessee, if the assessee has introduced compact spinning consisting of gadgets fitted to spindles within the ring frames in line with the decision of this Tribunal in the case of M/s. Prabhu Spinning Mills Pvt. Ltd.(supra).’’

Accordingly, we set aside the order passed by the learned Commissioner of Income Tax (Appeals) on the issue contested before us and restore the matter back to the file of the Assessing Officer with I.T.A.No.1328 /Mds/2013 :- 4 -: . the similar directions given by the Tribunal in assessee’s own case for assessment year 2007-2008.

In the result, the appeal filed by the assessee is treated as allowed for statistical purposes.

Order pronounced on the 20th day of January, 2015, at Chennai.

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