Madrasdated High Court · 2005

M/S L.S.Mills Ltd,Theni...Respondent in TC(A) No.124/03M/S Sri Ranilakshmi Gng.Spg,&Wvg Mills (P) Ltd.,Tirunagar,Madurai...Respondent in TC (A) No.138/03 486/04 & 769/04M/S Vishnu Shankar Mills Ltd.,Rajapalayam..Respondent in TC (A) 156/03 & 1113/04M/S Arcot Textile Mills Ltd.,Madurai..Respondent in TC(Appeal) Nos.214/03& 215/03M/S Swamiji Mills Ltd.,Sivakasi..Respondent in TC(A) 9/04, and 212/04Sree Ayyanar Spg.Wng Mills Ltd., ..Respondent in Mallangiran TC(A) 46/04M/S Saravana Spinning Mills Pvt. Ltd.,Dindigul..Respondent in TC (A) 53/04 & 277/04M/S Gomati Spinning Mills Ltd.,Tirupur..Respondent in TC(A)82/04M/S Loyal Textiles Millskovilpatti..Respondent in TC(A) 103/04M/S Sivaraj Spinning Mills (P) Ltd.,Tirupur..Respondent in TC(A) 123 to 125 of 2004The Vijayakumar Mills Ltd.,Palani..Respondent TC(A) 195/04 https://hcservices.ecourts.gov.in/hcservices/ M/S Rajapalayam Mills Ltd.,Madurai..Respondent in TC(A) No.202/04M/S Thiagrajar Mills Ltd.,Madurai...Respondent in TC(A) No.224/04M/S Venkatalakshmi Textile Pvt. Ltd.,Tirupur..Respondent in TC(A) No.262/04M/s.Varadhalakshmi Mills Ltd.,Thirunagar, Madurai.. Respondent in TC (A) 285/04M/s.Indra Cotten Mills Ltd.,Chennai..Respondent in TC (A) 312/04M/s.Sree Nithyakalyani Mills Ltd.,Thiruvadanai..Respondent in TC (A) 317/04M/s.Sithalakshmi Mills Ltd.,Madurai..Respondent in TC(A) 327/04 & 1076/2004M/s.Gitanjali Mills Ltd.,Rajapalayam..Respondent in TC (A) 363/04 and 364/04Sree Vadivambigai Textiles Ltd.,Sivagangai..Respondent in TC (A)435/04Raji Spinning Mills (P) Ltd.,Rajapalayam...Respondent in T (C) (A) 436 & 437 of 2004M/s.Arasan Textile Mills (P) Ltd.,Tuticorin -I...Respondent in TC (A) No.443/04 & TC (A) 750/04M/s. Sri Padmavathi Cotton MillsSrivilliputhur Road,Rajapalayam...Respondent in TC (A) 373/04M/s. Sivakami Mills Ltd.,Thenur, Samayanallur-625 402..Respondent in TC (A) 438/04 https://hcservices.ecourts.gov.in/hcservices/ M/s.Shri Sivakami Mills Ltd.,Madurai..Respondent in TC (A) 530/04M/s. Valli Cotton Traders Ltd.,N.VenkateswarapuramSattur Taluk..Respondent in TC (A) 727/04M/s/Bojraj Textile Mills Ltd.,Madurai-6..Respondent in TC (A) 728, 729/04& 951/04 ,1081/04M/s. Thirumalai Mills112,East Car StreetTirunelveli..Respondent in TC (A) No.743/04The Tuticorin Spinning Mills Ltd.,Tuticorin..Respondent in TC (A) 745 & 746/04M/s. Sirius Shipping Company Ltd.,Chennai-6...Respondent in TC(A) 952/04.M/s. Khader Spiners Ltd.,M.M.Kovilur Post, Dindugul..Respondent in TC (A) 1101/04M/s.Sri Karunambigai Mills Ltd.,Coimbatore..Respondent in TC (A) 1118/04The above Tax Cases filed under Section 256 (1) of Income Tax Act, 1961for Reference; and Tax Appeal Cases filed under Section 260-A of IncomeTax Act, 1961 against orders of Income Tax Appellate Tribunal, Madras asstated therein.The above Tax Cases filed U/s. 256 (1) of I.T. Act for reference to thiscourt by the Income Tax Appellate Tribunal B,C,A and C Bench Madras,respectively in1.R.A.No.62/Mds./98 in ITA.No.3892/Mds/98 in ITA.NO.3892/Mds.89 for theAssessment Year 1986-87 on the file and refer to the decision of thisCourt the following questions of law: viz.(i) Whether on the facts and in the circumstances of the case, theTribunal is right in law in holding that the expenditure incurred by theassessee during the accounting year on the cost of Carding System(Rs.31,22,679/-) was amount paid on current repairs and allowable undersection 31 of the Income Tax Act?" https://hcservices.ecourts.gov.in/hcservices/ (ii) Whether on the facts and circumstances of the case, the AppellateTribunal was right in law in directing allowance of the entire amount ofRs.31,22,679/- as Revenue expenditure?" (in TC.Ref.No.144/99) against the order in I.T.Appeal No.144/89-90 dated 20.6.89 on the file ofthe Commissioner of Income Tax (Appeals-I) Madurai Range, Madurai againstthe order in PA.No.47-018 - CV.3991/86-87 dated 28.3.89 on the file of theDeputy Commissioner of Special Range-II, Madurai, (in TC.(Ref.)No.144/99)2.R.A.Nos.551 and 552/Mds/93 in ITA.Nos.2775 and 2676 (Mds.)/92 for theAssessment year 1989-90 and 1990/91 on the file and refer to the decisionof this court the following questions of law:viz.(i) Whether the finding of the Tribunal, that the ring frame, N.M.M.Doubling frames and Double swift reeling Machine purchased by the assesseeat cost of Rs.20,64,868/- were not new machinary but were parts ofmachinery is valid and is not perverse?(ii) Whether on the facts and in the circumstances of the case, theAppellate Tribunal, was right in directing in allowing of the entireamount of Rs.20,64,868/- as revenue expenditure?" (in TC.Ref.No.408 and409 of 1999) against the order in I.T.Appeal No.120/1992-93 dated28.8.1992 on the file of the Commissioner of Income Tax Appeal-I Madurai against the order in PA.No.47-016-CV-3991/89-90 dated 17.3.1992 on thefile of the Deputy Commissioner of Income Tax (Special Range) II, Madurai(in TC.(Ref) Nos.408 and 409 of 1999). 3.R.A.No.61/Mds/98 in ITA.No.4651/Mds./89 for the Assessment Year 1986-87 on the file and refer to the decision of this court the followingquestions of law:viz.(i) Whether on the facts and in the circumstances of the case the Tribunalis right in law in holding that the expenditure incurred by the asesseeduring the accounting year on the cost of Carding Machines and SimplexMachines (Rs.11,76,576/-) was amount paid on current repairs and allowableunder Section 31 of the Income Tax Act?.(ii) Whether on the facts and in the circumstances of the case theAppellate Tribunal was right in law in directing Allowance of the entireof Rs.11,76,576/- was revenue expenditure)" (in TC.(Ref) No.70 of 2000) against the order in IT.Appeal No.72/89-90 dated 29.9.1989 on the file ofthe Commissioner of Income Tax (Appeal) II, Madurai against the order inPA.No.47-016-CV-3948/86-87 dated 30.8.1989 on the file of the AssistantCommissioner of Income Tax, Company Circle, Madurai (in TC.(Ref)No.70/2000) https://hcservices.ecourts.gov.in/hcservices/

4.R.A.No.9/Mds/98 in ITA.No.2774/Mds/98 for the Assessment Year 1990-91on the file and refer to the decision of this court the followingquestions of law; viz.(i) Whether on the facts and in the circumstances of the case the Tribunalis right in law in holding that the expenditure incurred by the assesseeduring the accounting year under cost of Replacement of Machinariesamounting to Rs.26,20,650/- was amount paid on account of currect repairsand allowable under section 31 of the Income Tax Act?" (ii) Whether on the facts and in the circumstances of the case, theTribunal was right in law in directing allowance of the entire amount ofRs.26,20,650/- a revenue expenditure)" (in TC.Ref.No.30 of 2001) againstthe order in ITA.No.237/93-94 dated 30.8.1993 on the file of theCommissioner of Income Tax (Appeals)I, Madurai against the order inPAN.No.47-016-CT-4664/1990-91 dated 19.3.1993 on the file of the DeputyCommissioner of Income Tax Special Range, Madurai (in TC.(Ref) No.30/2001).TC.(Appeals) under section 260(A) of I.T.Act 1961 preferred against (1) Income Tax Appellate Tribunal Madras 'B' Bench dated 14.6.1999 andmade in ITA.No.1709/Mds./98 for the assessment year 1995-96 against theorder in I.T.Appeal No.1069-C/97-98 dated 28.8.1998 on the file of theCommissioner of Income Tax Appeals, Coimbatore against order in PA.No. CV-1108 dated 17.2.1998 on the file of the Deputy Commissioner of Income TaxSpecial Range-I, Coimbatore. (in TC (A) No.46/2000).(2) ITAT Madras "C" Bench dated 24.3.99 made in ITAT.No.1716/Mds./1990 forthe Assessment Year 1987-88 against the order in ITA.No.441/1989-90 dated28.2.1990 on the file of the Commissioner of Income Tax Appeals II,Madurai against order in PA.No.47-016-CV-3991/87-88 dated 29.12.1989 onthe file of the Deputy Commissioner of Income Tax, Special Range I,Madurai (in TC.(A) No.231/2001)(3) ITAT Madras 'C' Bench dated 3.1.2003 made in ITA.No.1457/Mds./2002 forthe Assessment Year 1998-99 against the order in ITA.No.135/2000-01 dated23.7.2002 on the file of the Commissioner of Income Tax Appeals-I,Coimbatore against the order in PAN/GIR No.C2-1105/SR-II/CBE., dated28.2.2001 on the file of the Joint Commissioner of Income Tax SpecialRange-II, Coimbatore (in TC.(A) No.48/2003)(4) ITAT, Madras 'B' Bench dated 13.1.2003 made in ITA.No.1860/Mds/94 forthe Assessment Year 1991-92 against the order in ITA.No.47/94-95 dated19.5.1994 on the file of the Commissioner of Income Tax Appeals-I, Maduraiagainst the order in PA.No.47-055-CT-7519/DC/SR-II/Mdu. dated 18.2.1994 onthe file of the Deputy Commissioner of Income Tax Special Range, II,Madurai (in TC(A).No.53/03).5. ITAT, Madras 'B' Bench dated 26.9.2002 made in ITA.No.2845/mds/93 forthe Assesment year 1990-91, against the order in ITA.No.237/93-94 dated https://hcservices.ecourts.gov.in/hcservices/

30.8.93 on the file of the Commissioner of Income Tax(Appeals) I, Maduraiagainst the order in PAN.No.47-016-CT-4664/90-91/IT dated 19.3.93 on thefile of the Deputy Commissioner of Income Tax, Special Range, Madurai (inTC(A) No.54/03).6. ITAT, Madras 'C' Bench dated 21.1.2003 in ITA.Nos.1430, 1431 of 2002for the Assessment years 1993-94 and 1994-95 respectively against theorder in ITA.No.570 & 571 - C/2001 - 2002 dated 30.6.2002 on the file ofthe Commissioner of Income Tax (Appeals) II, Coimbatore against the orderin PANGIR.Nos.S-3-2001-02/ Tiruppur and S-3/Circle-1/Tiruppur dated11.2.2002 on the file of the Assistant Commissioner of Income Tax CircleI, Tiruppur (in TC(A) Nos.60 & 61 of 2003)7. ITAT, Bench 'B" Chennai dated 27.3.2003 made in ITA Nos.1382/Mds/1999,1950/Mds/2000 and 1965/Mds/2000 respectively for the Assessment years1995-96 to 1997-98 respectively against the order in IT Appeal Nos.244-C/98-99, dated 30.7.99, 121-C/99-2000 dated 13/10/00 and 63-C/2000-01dated 20.10.2000 respectively on the file of the Commissioner of IncomeTax Appeals Coimbatore against the order in PAN.No.C4-8833 dated 27.3.98;Cy-8833/SR-II/CBE dated 30.3.99 and Cy-8833/SR-II/97-98/CBE dated29.3.2000 respectively on the file of the Deputy Commissioner of IncomeTax, Special Range II, Coimbatore and Joint Commissioner of Income TaxSpecial Range II, Coimbatore respectively. (in TC(A) Nos.62 to 64 of 2003)8. ITAT, Madras 'A" Bench dated 28.2.2003 in ITA.No.1426/Mds/2002 for theassessment year 1998-99 against the order in IT Appeal No.20-C-2002/2003dated 30.6.2002 on the file of the Commissioner of Income Tax Appeals II,Coimbatore against the order in PAN/GIR.No.P-3/1998-99 dated 30.3.2002 onthe file of the Deputy Commissioner of Income Tax, Salary Circle I,Coimbatore (in TC(A) 94 of 2003) 9.ITAT, Madras 'A" Bench dated 18.3.2003 in ITA.No.675/Mds/1999 for theAssessment year 1994-95 against the order in IT Appeal Nos.705, 793,792/2001-2002 dated 28.1.2002 on the file of the Commissioner of IncomeTax Appeals I, Coimbatore against the order in PA.No.GIR.No.F2-7763/SIC-2/CBE dated 22.3.01 on the file of the Deputy Commissioner of Income Tax,Special Investigation Circle II, Coimbatore (in TC(A).No. 95 of 2003) 10. ITAT, Madras 'C" Bench dated 10.2.2003 in ITA.No.755/Mds/1994 forthe Assessment years 1990-91 against the order in IT Appeal No.678/92-93dated 15.2.94 on the file of the Commissioner of Income Tax Appeal I,Madurai against the order in PAN.No.47-016-Fy-4052/SR-2/mdu dated Nil onthe file of the Deputy Commissioner of Income Tax, Speical Range II,Madurai (in TC(A) Nos.96 of 2003)11.ITAT, Madras 'C" Bench dated 4.3.2003 in ITA.No.543/Mds/95 for theAssessment year 1991-92 against the order in IT Appeal No.852/93-94 dated30.12.94 on the file of the Commissioner of Income Tax (Appeals) Maduraiagainst the order in PANo.49-003-CZ -8024/DC/SR-II/Mdu dated 15.2.94 on https://hcservices.ecourts.gov.in/hcservices/ the file of the Deputy Commissioner of Income Tax, Special Range II,Madurai (in TC(A) 124 of 2003) 12.ITAT, Bench 'B" Madras dated 24.3.2003 in ITA.No.175/Mds/1995 for theAssessment year 1991-92 against the order in IT Appeal No.197/94-95 dated28.10.94 on the file of the Commissioner of Income Tax (Appeals) I,Madurai against the order in PA.No.47-021-CY-1092 dated 31.3.1994 on thefile of the Deputy Commissioner of Income Tax, Special Range(Cent) Madurai(in TC(A)No. 138/03)13.ITAT, Madras 'B" Bench dated 28.2.2003 made in ITA.No.2105/Mds/1994 forthe Assessment year 1991-92 against the order in IT Appeal No.65/1994-95dated 28.7.1994 on the file of the Commissioner of Income Tax Appeals IMadurai against the order in PA.No.49-000-60-5213/DC.SR/II/Madurai dated28.3.94 on the file of the Deputy Commissioner of Income Tax, SpecialRange Madurai (in TC(A) 156 of 2003) 14.ITAT, Madras 'C" Bench dated 28.5.2003 in ITA.No.1259 and 1260 /Mds/1994 respectively for the Assessment years 1991-92 and 1992-93respectively against the order in IT Appeal Nos.676 and 677/93-94 dated16.2.94 on the file of the Commissioner of Income Tax Appeals I, Maduraiagainst the order in PA-47-016-CV-3949/91-92/IT dated 20.12.93 on the fileof the Deputy Commissioner of Income Tax, Special Range I, Madurai (in TC(A) 214 & 215 of 2003)15. ITAT Bench 'B' Chennai dated 24.7.2003 made in ITA.No.1097/Mds/96Assessment year 93-94 against the order in ITA.No.354/95-96 dated 20.2.96on the file of the Commissioner of Income Tax (Appeals I) madurai againstthe order in PAN/GIR/No.47-016-CT-4083 dated 7.4.95 on the file of theDeputy Commissioner of Income Tax Special Range I, Madurai 2. (TC.No.(A)9of 2004).16.ITAT, Madras 'B" Bench dated 22.1.2003 made in ITA.No.1264/Mds/1994,Assessment year 91-92 against the order in ITA No.580/93-94 dated 8.2.94on the file of the Commissioner of Income Tax (Appeals I), Madurai againstthe order in PA.No.47-016-CV-3947/91-92 dated 22.9.93 on the file of theDeputy Commissioner of Income Tax, Special Range I, Madurai (TC(A) 46 of2004) 17.ITAT, Madras 'B" Bench dated 31.12.02 made in ITA.No.2596/Mds/1994Assessment year 1992-93 against the order in ITA No.357/94-95 dated8.9.1994 on the file of the Commissioner of Income Tax (Appeals I),Madurai against the order in PA.No.49-003-CY-0220 Order dated 4.4.94 onthe file of the Deputy Commissioner of Income Tax, Special Range II,Madurai (TC(A) 53 of 2004)18. ITAT Madras 'B' Bench dated 22.5.2001 made in ITA No.469/Mds/2000Assessment year 97-98 against the order in ITA No. 387-C/99-2000 orderdated 17.2.2000 on the file of commissioner of Income Tax (Appeals) https://hcservices.ecourts.gov.in/hcservices/ Coimbatore, against the order in PAN No. G4/SR/II/CBE dated 11.10.99 onthe file of Joint Commissioner of Income Tax Special Range – II,Coimbatore. (TC (A) No. 82 /2004)19. ITAT Madras 'B' Bench dated 3.7.2003 made in ITA No.290/Mds/96Assessment year 92-93 against the order in ITA No. 124/95-96 dated9.11.1995 on the file of commissioner of Income Tax (Appeals I) Maduraiagainst the order in PAN No. 47-016-CQ-4644 DC.S.R.II/TDU dated 24.3.95 onthe file of Deputy Commissioner of Income Tax Special Range – II, Madurai.(TC (A) No. 103 /200420. ITAT Madras 'B' Bench dated 28.2.2003 made in ITA Nos.1427-1429/MDd/2002 Assessment year 93-94 to 1995-96 on the file against theorder in ITA Nos.567-C,568-C,569-C/2001-2002 dated 30.6.2002 on the fileof the Commissioner of Income Tax (Appeals) -II Coimbatore against theorder in PAN/GIR No.S-2/Circle-I Tirupur dated 13.2.02 on the file of theAssistant Commissioner of Income Tax Circle – 1 Tirupur. TC (A) No. 123 to125 of 200421. ITAT Madras 'C' Bench dated 5.11.2003 ITA No.2147/Mds/95 Assessmentyear 92-93 against the order in ITA No. 153/95-96 dated 31.7.2005 on thefile the Commissioner of Income Tax (Appeals I) Madurai against theorder in PA No. 47-016-CV-4761 dated 6.3.95 on the file of the DeputyCommissioner of Income Tax Special Range – I, Madurai.2 (TC (A) No. 195 of2004)22. ITAT Madras 'B' Bench dated 26.8.2003 in ITA No.1603/Mds/96 Assessmentyear 91-92 against the order in ITA No. 2697/93-94 dated 9.4.96 on thefile the Commissioner of Income Tax (Appeals ) Madurai against the orderin PA No. 47-016-CZ-4051 dated 27.12.93 on the file of the DeputyCommissioner of Income Tax Special Range – I, Madurai. (TC (A) No. 202 of2004)23. ITAT 'C' Bench Chennai dated 22.7.2003 in ITA No.1292/Mds/95Assessment year 92-93 against the order in ITA No. 676/94-95 dated28.3.95 on the file of the Commissioner of Income Tax (Appeals I) Maduraiagainst the order in PA No. 47-016-CT-4083 dated 4.10.94 on the file ofthe Deputy Commissioner of Income Tax Special Range – I, Madurai.1(TC (A) No. 212 of 2004)24. ITAT Madras 'A' Bench dated 17.11.2003 in ITA No.55(Mds)97 Assessmentyear 93-94 against the order in ITA No. 97/96-97 dated 30.10.96 on thefile the Commissioner of Income Tax (Appeals) Madurai against the orderin PAN/GIR No. 47-022-CN 9955 dated 29.3.96 on the file of the DeputyCommissioner of Income Tax Special Range – II, Madurai. (TC (A) No. 224 of2004)25. ITAT Madras 'A' Bench dated 17.11.2003 in ITA No.49/Mds/97 Assessmentyear 93-94 against the order in ITA No. 39/96-97 dated 30.10.1996 on the https://hcservices.ecourts.gov.in/hcservices/ file the Commissioner of Income Tax (Appeals I) Madurai against theorder in PAN No. 47-016-CY-4052/DC.SR.II/MDU dated 29.3.96 on the fileof the Deputy Commissioner of Income Tax Special Range – II, Madurai. (TC(A) No. 250 of 2004)26. ITAT Chennai 'A' Bench dated 8.12.2003 in ITA No.762/Mds/2000Assessment year 95-96 against the order in ITA No. 43-C/98-99 dated21.2.2000 on the file the Commissioner of Income Tax (Appeals) Coimbatoreagainst the order in PAN/GIR No.CZ-1039/SR-II/CBE dated 17.3.98 on thefile of the Deputy Commissioner of Income Tax Special Range – II,Coimbatore (TC (A) No. 262 of 2004)27. ITAT Madras 'B' Bench dated 23.10.2003 in ITA No.53/Mds/97 Assessmentyear 93-94 on the file against the order in ITA No. 133/96-97 dated24.10.1996 on the file of the Commissioner of Income Tax Appeals IMadurai against the order in PAN No. CY-0220/DC.SR.II/MDV dated 22.3.96on the file of the Deputy Commissioner of Income Tax Special Range – II,Madurai. (TC (A) No. 277 of 2004)28. ITAT Madras 'B' Bench dated 27.11.2003 in ITA No.103/Mds/96 Assessmentyear 92-93 against the order in ITA No. 218/95-96 dated 5.10.95 on thefile of the Commissioner of Income Tax (Appeals I) Madurai against theorder in PA No. 47-016-CN-4099 dated 31.3.95 on the file of theAssistant Commissioner of Income Tax Central Circle, Madurai. (TC (A) No.285 of 2004)29. ITAT Madras 'A' Bench dated 18.9.2003 in ITA No.2701/Mds/95 Assessmentyear 92-93 against the order in ITA No. 209/94-95 dated 25.9.95 on thefile of the Commissioner of Income Tax (Appeals VII) Madras against theorder in GI No. 10-I, dated 30.1.1995 on the file of the DeputyCommissioner of Income Tax Special Range – II, Madras.(TC (A) No. 312 of2004)30. ITAT Bench 'A' Madras dated 6.11.2003 in ITA No.2590/Mds/96 for theAssessment year 93-94 against the order in ITA No. 61/96-97 dated 30.9.96on the file of the Commissioner of Income Tax (Appeals I) Maduraiagainst the order in PAN/GIR No. 47-016-CY-4738 dated 14.2.95 on the fileof the Deputy Commissioner of Income Tax Special Range – I, Madurai.2 (TC(A) No. 317 of 2004)31. ITAT Bench 'B' Madras dated 21.10.2003 in ITA No.2699/Mds/94 for theAssessment year 93-94 against the order in ITA No. 95/96-97 dated 7.10.96on the file the Commissioner of Income Tax (Appeals I) Madurai againstthe order in PAN No. 47-016-CQ-4063 dated 26.2.96 on the file of theDeputy Commissioner of Income Tax Special Range – I, Madurai.2(TC (A) No.327 of 2004)32. ITAT Madras 'A' Bench dated 10.10.2003 ITA No.643/(Mds)/96 Assessmentyear 92-93 against the order in ITA No. 37/95-96 dated 1.12.95 on the https://hcservices.ecourts.gov.in/hcservices/ file the Commissioner of Income Tax (Appeals I) Madurai against theorder in PA/GIR No. 47-016-CY-4052 dated 31.3.95 on the file of theDeputy Commissioner of Income Tax Special Range – II, Madurai.2(TC (A) No. 342 of 2004)33. ITAT Madras 'A' Bench dated 13.8.2002 made in ITA Nos.98 & 99/Mds/94Assessment year 91-92 against the order in ITA No. 382/93-94 dated28.10.93 on the file of the Commissioner of Income Tax (Appeals ) Maduraiagainst the order in PA No. 47-016-CX-3984/91-92 dated 9.2.93 on the fileof the Deputy Commissioner of Income Tax Special Range – I, Madurai. 625001.(TC (A) Nos. 363 & 364 of 2004)34) ITAT Madras "A" Bench dated 19.9.2003 made in ITA. 2673/mds/95Assessment year 1992-93 against the order in ITA No. 160/95-96 dated26/9/95 on the file of the Commissioner of Income-Tax (Appeal I) Madurai,against the order in P.A.No. 47-016-CQ-3948 dated 31/3/95 on the file ofAssistant Commissioner of Income Tax, Central Circle, Madurai (TC (A) No.377 of 2004) ITAT Madras 'B' bench dated 9/10/03 Madurai.35)ITA No. 1694/mds/1996-Assessment year 1993-94 against the order in ITANO. 87/96-97 DATED 15/5/96 on the file of the Commissioner of income tax(Appeal) Madurai against the order PAN 47-042-CV-9114/DCSR.II (MDU) dated29/3/96 on the file of Deputy Commissioner of Income TAx Special Range –Madurai. [TC(A) No. 435 of 2004]. ITAT Madras 'B' Bench dated 15/10/03,Madurai.36)ITAT Madras "B" Bench dated 15.10.2003 made in ITA No. 100 &101/mds/1996- Assessment year 1993-94, 1994-95 against the order ITA No.373 & 3474/95-96, dated 25/10/96 on the file of the Commissioner of IncomeTax (Appeals I) Madurai against the order in P.A.No. /G.I.R.No. 49-003-CN-0246& CN 0246 dated 3/5/95 , 23/5/05 respectively on the file of Deputy ofCommissioner of Income Tax Special Range-I – Madurai(TC(A) No. 436 & 437 of 2004)37)ITAT, Madras 'C' Bench dated 11/12/03 made in ITA No. 954/mds/96-Assessment year – 1992-93 against the order in ITA No. ITA 70/95-96 dated21/3/96 on the file of the Commissioner of Income Tax (Appeals) madras-3against P.A.N./G.I.R.NO. 47-042-ct-9122 dated Nil on the file of theAssistant Commissioner of Income-tax – Investigation Circle – II –Madurai. (CTC (A) No. 443 of 2004)38)ITAT, Madras 'B' Bench dated 17/11/03 Made in ITA No. 803 (mds) 96Assessment year 92-93 against the order in ITA 57/95-96 dated 16/1/96 onthe file of the Commissioner of Income Tax (Appeals-I) Madurai against theorder in PA No. 47-021-CY-1992-93 dated 31/1/05 on the file of theAssistant Commissioner of Income Tax, Central Circle madurai [TC(a) No.486/04]39)ITAT, Madras 'C' Bench dated 18/11/03 made in ITA No. 1435/mds/1996- https://hcservices.ecourts.gov.in/hcservices/ Assessment year 9192 against the order dated 28/3/96 on the file of theCommissioner of Income Tax (Appeals I) Madurai against the order inPAN/GIR.No. P 446/I(2) VNR dated 29/3/04 on the file of the Income TaxOffice, Ward I(2) virudhu Nagar [TC (A) 373 of 2004]40) ITAT, Madras 'B' Bench dated 27/11/03 made in ITA No. 193/mds/96-Assessment year 1992-93 against the order in ITA No.167/95-96 dated13/11/95 on the file of the Commissioner of Income Tax (Appeals I),Madurai-1 against the order in P.A.N./GIR No. 47016-CY-4068/DC.SR.II/MDUdated 28/2/95 on the file of the Deputy Commissioner of Income tax SpecialRange II – Madurai.[TC(A) 438 of 2004]41)ITAT Madras 'C' Bench dated 29.05.2003 made in ITA NO. 2106/mds/94Assessment year 1991-92 against the order in ITA No. 62/94-95 dated 7/7/94on the file of the Commissioner of Income Tax (Appeals)-I Madurai-1against the order in PAN/GIR No. 47-016-CV-4068/DC-SR II. MDU dated 7/3/94on the file of the Deputy Commissioner By Income Tax-Special Range – IIMadurai-2 [TC(A) 530/04]42)ITAT Madras 'C' Bench dated 24/2/04 made in ITA No. 773/mds/96-Assessment year – 92-93 against the order in ITA NO. 162/95-96 dated25/1/96 on the file of the Commissioner of Income Tax (Appeals) I Maduraiagainst the order in P.A.N/G.I.R.No. 47/042/C2-9946/DC.SR.II/MDU, dated28/2/95 on the file of the Deputy Commissioner of Income Tax – SpecialRange Madurai [TC(A) 727/04]43)ITAT Madras 'A' Bench dated 10/2/04 made in ITA No. 180/mds/9415/mds/94-Assessmentyear 1990-91 against the order in ITA 175/93-94 dated5/11/93 on the file of the Commisioner of Income Tax (Appeals) I Maduraiagainst the order in PAN/GIR No. 47-016-CN-3956 dated 24/3/93 on the fileof the Assistant Commisioner of Income Tax, Central Circle, Madurai [TC(A)728 & 729/04]44)ITAT Madras 'C' Bench dated 16/1/04 made in ITA No. 335 (mds/97-Assessment year 1994-95 against the order in ITA No. 352/96-97 dated28/11/96 on the file of the Commissioner of Income-Tax (Appeals) I Maduraiagainst the order in PAN No. 47-019-FY-7892 dated 9-9-96 on the file ofthe Deputy Commissioner of Income-Tax Special Range I, Madurai-2 [TC(A)No. 743/04)45)ITAT Madras 'A' Bench dated 10/2/04 made in ITA No. 955/mds/96 &351/mds/95-Assessment year 92-93, 91-92 against the order in ITA Nos. 18794-95 and 105/95-96 MDU dated 10-11-94 dated 8.3.96 respectively on thefile of the Commissioner of Income-Tax Appeals-I Madurai and theCommissioner of Income Tax (Appeals) Madras-34 against the order inPAN/GIR. No. 47-016-CV-4747 dated 31/3/04 & 31/3/05 respectively on thefile of the Assistant Commissioner of Income Tax – Investigation Circle –II Madurai [TC (A) Nos. 745 & 746/04] https://hcservices.ecourts.gov.in/hcservices/ 46)ITAT Madras 'B' Bench, dated 12/3/04 made in ITA No. 1385/mds/1998Assessment year 93-94 against the order in ITA No. 604/95-96 dated23/04/98 on the file of the Commissioner of Income-tax (Appeals) VIIMadras against the order in PA No. 47-042 - CT - 9112 order dt. 19/12/95on the file of the Assistant Commissioner of Income - TaxInvestigation Circle - II – Madurai [TC(A) No. 750 of 2004]47)ITAT madras 'B' Bench dated 17/10/03 ITA No. 2702 (mds)/96 Assessmentyear 93-94 against the order in ITA No. 100/96-97 dated 8.10.96 on thefile of the Commissioner of Income Tax (Appeals I) Madurai against theorder in PAN/GIR No. 47-021-C4-1092 dated 23-02-96 on the file of theDeputy Commissioner of Income Tax, Special Range -I Madurai-2.[TC(A) No. 769/04]48) ITAT, Madras 'A' Bench dated 20/2/04 made in ITA No. 2669/mds/95Assessment year 92-93 against the order in I.A.No. 35/95-96 dated 27-09-95on the file of the Commissioner of Income Tax (Appeals)I- Madurai againstthe order in PA No. 47-016-CQ – 3956 dated .Nil. On the file of theAssistant Commissioner of Income-Tax Central Circle – Madurai. [TC (A) No.951/04]. 49)ITAT madras 'C' Bench, dated 28/5/04 made in ITA NO. 162/mds/2001Assessment year 1997-98 against the order in ITA No. 329/2000-01 dated11/12/2000 on the file of the Commissioner of Income-Tax (Appeal IV)Chennai against the order in PAN/GIR/No. 1514-S dated 2/3/2000 on thefile of the Deputy Commissioner of Income Tax, Company Circle IV(6)Chennai. 6 (TC(A) No. 952/04)50)ITAT madras 'A' Bench, dated 25/5/04 made in ITA NO. 1433/mds/1997Assessment year 1994-95 on its file against ITA No. 484/96-97 dated25/3/1997 on the file of the Commissioner of Income-Tax Appeal I Maduraiagainst the order in PAN/GIR/No. 47-016- CQ 4063 order dated 31/12/1996on the file of the Deputy Commissioner of Income Tax,, Special Range – 1,Madurai – 2. (TC(A) No. 1076/0451)ITAT Madras 'A' Bench, dated 24/5/01 made in ITA NO. 1548/mds/91Assessment year 1988-89 & ITA No.1595/mds/91 Assessment year 1988 & 89dated 24/5/2001 against ITA No.344/90-91 on the file of the Commissionerof Income-Tax (Appeals) Madras against the order in PAN-47-016-CN-3956dated 23/3/90 on the file of the Assistant Commissioner of Income Tax,Company Circle II 1/C Madurai. (TC(A) No. 1081/04)52) ITAT, Madras 'C' Bench dated 13.7.2004 made in ITA No.54/mds/1998Assessment Year 93-94 order against the order in ITA No.142/96-97 dt.28.10.96 on the file of the Commissioner of Income-Tax Appeal-I Maduraiagainst the order PA N No. 49-003-CV-0194/DC/SR.II/MDU dated 21.3.96 onthe file of the Deputy Commissioner of Income Tax Special Range-II https://hcservices.ecourts.gov.in/hcservices/ Madurai-2 (TC (A) No.1101/04) 53) ITAT, Madras 'D' Bench dated 17.5.2002 Made in ITA Nos. 1318/mds/94Assessment Year 91-92 order against the order in ITA No.1390-C/98-99 dt.20.9.99 on the file of the Commissioner of Income Tax (Appeals Coimbatoreagainst the of order PAN /GIR No.CV-1059/SR-II-CBE dated 30.12.98 on thefile of the Joint Commissioner of Income Tax Special Range -II Coimbatore(TC (A) 1118/04)54) ITAT, Madras 'B' Bench dated 11.7.2001 made in ITA No.2759/MDS/92Assessment Year 89-90 against the order ITA No.167/92-93 order dt. 19.8.92on the file of the commissioner of Income Tax Appeal I, Madurai againstthe order PAN-47-016-CX-3948/1989-90 dt. 27..3.92 on the file of theDeputy Commissioner of Income Tax Special Range I- Madurai -2 (TC (A)1120/04)55) ITAT, Madras 'C' Bench, dated 28.7.2004 made in ITA.48/Mds/97 -Assessment Year 1993-94 against the order in ITA.43/96-97 dated 23.10.96on the file of the Commissioner of Income Tax (Appeals-1) Madurai againstthe order in PA.No.49-000-CQ-5213/DCSR.II/Mdu. dated 29.3.1996 on the fileof the Deputy Commissioner of Income Tax, Special Range-II, Madurai (TC(A) 1113/04). Mrs. Nalini Chidambaram, Senior counsel for Mrs. Pushya Sitaraman (Standing counsel for Income Tax):- For Applicants in all the T.Cs. except T.C.Nos. 62 to 64/2003 and for Respondents in T.C. Nos. 62 to 64/2003. Mr. C. Natarajan, Senior counsel for Mr. N. Inbarajan for Applicant in T.C.No. 62 to 64/2003. Mr. N. Quadir Hoseyn:- For Respondent in T.C. Nos. 144, 408, 409/99, 231/2001 and 435/2004. Mr. P.P.S. Janarthana Raja for M/s Subbaraya Aiyar:-For Respondent in T.C.Nos. 46/2000, 60, 61, 94, 95, 96, 156/2003, 9,53,82,123 to 125, 250, 262, 277, 342 and 436/2004. Mr. T.N. Seetharaman:- For Respondent in T.Cs. 30/2001, 54/2003 and 443/2004. Mr. R. Venkataraman, Senior counsel for Mr. J. Balachandar:- For Respondent in T.C.Nos. 48 and 124/2003. Mr. J. Balachandar for Mr. S. Sridhar:- For https://hcservices.ecourts.gov.in/hcservices/ Respondent in T.C.Nos. 53/2003, 46, 312 and 317/2004. Mr. R. Meenakshisundaram:- For Respondent in T.C.No. 103/2004. Mr. N. Devanathan:- For Respondent in T.C.Nos. 363 and 364/2004. Mr.J.Balachander for Respondent in T.C.Nos. 202/2004. Mr. R. Srinivasan:- For Respondent in T.C.No. 224/2004. No appearance in T.C.70/2000, 138/2003, 212/2004, 285/2004, 327/2004, 486/2004 COMMON JUDGMENT(Judgement of Court was delivered by P. Sathasivam, J.,) Since the Tax Case reference and Appeals relate to samequestion to be considered by this Court, all the above matters are beingdisposed of by the following common order. 2. T.C.No. 144/199 (Ref) relates to reference made byIncome-tax Appellate Tribunal, Madras Bench-B. By the ReferenceApplication, wherein the Commissioner of Income-tax, Madurai is theapplicant, and Messrs Janakiram Mills Ltd., Tenkasi Road, Rajapalayam isthe respondent, the Revenue requested the Income Tax Tribunal to refer thefollowing questions of law arising out of the order of the Tribunal dated19-12-97 to this Court for its opinion. They are: "1). Whether on the facts and in the circumstances ofthe case, the Tribunal is right in law in holding that theexpenditure incurred by the assessee during the accounting yearon the cost of carding system (Rs.31,22,679/-) was amount paidon current repairs and allowable under section 31 of the Income-tax Act? 2). Whether on the facts and in the circumstances ofthe case, the Appellate Tribunal was right in law in directingallowance of the entire amount of Rs.31,22,679/- as revenueexpenditure?" 3. For convenience we shall refer the facts in T.C.No.144/99. The assessee in that case had claimed that the expenditure of https://hcservices.ecourts.gov.in/hcservices/ Rs.31,22,679/- on replacement of carding system by high production cards,be treated as revenue expenditure for the assessment year 1986-87. TheAssessing Officer had negatived the assessee's claim. On appeal by theassessee, the C.I.T. (Appeals), following the decision of the AppellateTribunal in the cases of ITO v. SRI VARADHARAJA TEXTILES PVT. LTD., (9ITR 469) and the decision of the Supreme Court in the case of CIT v.MAHALAKSHMI TEXTILE MILLS LTD., (66 ITR 710) held that the expenditureincurred was only for replacement of part of the textile machinery andtherefore was allowable as revenue expenditure. Aggrieved by the order ofthe CIT (Appeals), the department had filed further appeal before theTribunal. The Tribunal after noting the inspection report and onverifying similar machineries installed in Indira Cotton Mills, Chennaiand after following earlier decision of the Tribunal on the same point,has treated the expenditure on carding machine as revenue expenditure andthus allowed the asessee's claim. Inasmuch as the second question raisedby the Revenue is covered by the first question, the Tribunal has referredonly the first question, as set out earlier, to this Court for its opinion. 4. Heard Mrs., Nalini Chidambaram, learned senior counselfor the Department; Mr. C. Natarajan, learned senior counsel forappellants in T.C.Nos. 62 to 64/2003, 93 and 251/2003; and Messrs N.Quadir Hoseyn, P.P.S. Janarthana Raja, T.N. Seetharaman, R. Venkataraman,J. Balachandar, R. Meenakshisundaram, N. Devanathan, and R. Srinivasan forrespondents. 5. The point for consideration is, whether themodernisation/current/repair expenditure is allowable as “revenueexpenditure”, as claimed by the assessees or the replacement of cards/blowroom machinery/combing machinery etc., are to be considered as “capitalexpenditure”, as claimed by the Revenue? 6. The materials placed by both sides show that TextileMills, largely in Tamil Nadu, have been claiming the expenses relating topurchase of new machinery as current repairs/revenue expenditure, wherethe said purchase was as a part of modernisation programme or replacementof old machinery. It is the claim of the Department that the machineryreplaced in most of the cases are complete machinery, capable ofindependent operation. The Tribunal has allowed deduction as currentrepairs/revenue expenditure on the premise that: a. The entire textile mill should be treated as one single plant, and each machinery therefore is only a part of it. b. Wherever the spindlage or capacity has not increased due to the purchase of the new machinery in the place of the old one, it cannot be said that there is any enduring advantage. https://hcservices.ecourts.gov.in/hcservices/

7. Mrs. Nalini Chidambaram, learned senior counsel appearingfor the Department, would submit that most of the earlier decisions ofthis Court have gone on the presumption that what was replaced was a partof a machinery, and not the entire machine itself. For example, RingFrames, which are complete spinning machines consisting of severalspindles, have been erroneously assumed to be parts of machinery, and theexpenditure on replacement thereof has been allowed as a revenueexpenditure. 8. It is also her claim that the fact that replacement ofworn out machinery with new machinery results in an enduring benefit tothe assessee has not been considered either by the Tribunal, or by thisCourt in the decisions rendered earlier. According to her, wherever a newmachine is purchased, the assessee is granted depreciation spread over aperiod of time, since it will result in an enduring benefit to him. Thisenduring benefit would be there, regardless of whether the assesseepurchases the machinery for the first time, or purchases it as areplacement of an old or worn out machine. It would lead to an absurdresult if the purchase of a new machine by a first time user were to betreated as a capital expenditure as it results in enduring benefit, butthe purchase of the same machine by some one who already owned a similarmachine, is treated as a revenue expenditure/current repairs. 9. The Tribunal has been treating the entire textile mill asa single plant, and all the machinery therein as parts of the plant.Unlike continuous casting machinery in the steel industry, or certainother processes where the raw material is fed in one end and the finishedproduct comes out at the other without any intervention in between, thetextile mill, even in the case of "composite mills" consist of distinctsections such as blow room, carding, ginning, spinning, weaving andfinishing. The goods are normally carried manually after finishing oneprocess to another part of the factory for the next process. There areseveral mills that do only one or some of the above activities such ascarding and ginning or only spinning, or only calendaring and finishingetc. Thus, according to the Department, can a textile mill be treated asa single unit with the various machinery being treated as parts. Themachinery are all capable of independent action, and the fact that thenext process is carried on by another machine would not lead to theconclusion that both machines are only parts and not complete machinery bythemselves. 10. Learned senior counsel for the Department furtherpointed out that relief has been granted in many cases on the basis thatwhere the new machinery had the same installed capacity as the oldmachinery which were replaced, there is no increase in capacity. It mustbe pointed out that although in theory the worn out machines may have aninstalled capacity of a certain spindlage or certain production capacity, https://hcservices.ecourts.gov.in/hcservices/ in practice, since they are old and worn out, they would not be able tokeep up the efficiency of work. It is further claimed by the Departmentthat old and worn out machines are more prone to breakdowns due to wearand tear, and thus cannot produce the same quantity of goods in a statedtime as new machines. The new machines installed are technologicallymore advanced than the old replaced machinery and more efficient in termsof quantity and quality of output. The stand of the Department that unlessthe overall production capacity is increased, any purchase of machinerywould only be treated as revenue expenditure is erroneous. The view thatany purchase of new machinery in replacement of an old one would betreated as revenue expenditure if there is no increase in productioncapacity would have adverse effects on the concept of capital and revenueexpenditure. It is brought to our notice by the Revenue that in most ofthese cases, some items of large machinery are changed every year,resulting in a practically new plant in the course of two or three years.Large capital investment in new machinery, merely because it is for themodernisation of a factory cannot be treated as anything other thancapital expenditure. 11. It is the further claim of the Department that afterthe introduction of the concept of block of assets, any sale ofdepreciable assets, would result in its value being removed from theblock, and any addition of new machinery would result in addition to theblock. If the removal from the block is reduced, but the addition istreated as revenue expenditure, the value of the block of assets wouldshow a really low picture not in consonance with the real value of theassets. Whereas depreciation is granted at a fixed percentage dependingon the type of depreciable asset, taking into account its wear and tearand useful life, the textile mills have sought to take 100% depreciationby a backdoor method of claiming it as current repairs/revenueexpenditure. The schedule of depreciation given in the Appendix of theIncome Tax Rules specifically mentions items of machinery or equipmenteligible for 100% depreciation. 12. Learned senior counsel for the Department also pointedout that the textile mills have treated the purchase of new machinery intheir balance sheet as addition to fixed assets, whereas for the purposeof income tax alone, they are claiming it as a revenue expenditure orexpenditure on repairs. This shows that it is only for the purpose ofavoiding payment of tax that the treatment is given as revenueexpenditure, when it is well within the knowledge and belief of the Millsthat the purchase of the machinery resulted in acquisition of new assets.While the value of fixed assets in the books of the company would be high,as it would include the value of the newly purchased machinery, the blockof assets on which depreciation would be taken, would show a very lowfigure, as the written down value of the old machinery sold would havebeen removed, while the value of the new machinery purchased would nothave been included. It is also brought to our notice that the textilemills obtain long term loans for the purchase of new machinery from banks https://hcservices.ecourts.gov.in/hcservices/ and financial institution against the security of such new machines. Suchlong-term finance will not be provided against items that could beconsidered only as revenue expenditure. The sum and substance of theargument of the learned senior counsel for the Department is that if thereplacement is of a part of a machinery, it would amount to revenueexpenditure and wherever new machinery has been purchased in replacementof an old one, it can only be treated as a capital expenditure. 13. In this connection, the learned senior counselappearing for the Revenue, by drawing our attention to definition"machinery/plant", relied on a decision of this Court in the case of MIRMOHAMMED ALI (38 ITR 413) which was upheld by the Supreme Court in 53 ITR165, wherein it has been held that machinery does not cease to bemachinery merely because it has to be used in conjunction with one or moremachines, nor merely because it is installed as a part of a manufacturingor industrial plant. The learned senior counsel has also brought to ournotice a judgement of the Gujarat High Court in KIRAN CRIMPERS (225 ITR84) wherein it has been held that the term "plant" has not been used undersection 32 OF THE income Tax Act, 1961 (hereinafter referred to as “theAct”) or the Rules in the wide meaning commonly ascribed to it. TheGujarat High Court has held that since four different terms, viz.,buildings, machinery, plant and furniture have been used in section 32, itwould follow that the term “plant” has been used in a narrow sense to meanwhatever apparatus is used by a person to carry on the business which doesnot fall under the category of “building”, “machinery” or “furniture”.Thus, according to the Department, for the purpose of the Income Tax Act,a view cannot be taken that the entire textile mill is a plant. 14. With regard to the claim that the Department has notgone on appeal in respect of the judgments rendered by this Court, holdingthat the replacement of textile machinery amounted to revenue expenditure,it is stated that the Supreme Court has held in a number of cases thatappeals cannot be filed in one assessee's case without filing in respectof another assessee without justifiable cause. It is also stated that allthe cases decided earlier pertained to the period prior to theintroduction of the concept of Block of Assets with effect from 1988-89onwards, during which time the fact of no increase in capacity, and themill being an integrated unit would have a bearing on deciding if theexpenditure is capital or revenue. It is also pointed out before us thatonly in 3 cases, i.e., GITANJALI MILLS (265 ITR 681), TUTICORIN SPINNINGMILLS LTD.,(261 ITR 291) and L.S Mills(Unreported) pertained to the periodafter 1988-89. The Department did not file appeals to the Supreme Courtin these cases, as the tax effect in each case was less than Rs.5 lakhs.The Central Board of Direct Taxes has given instructions that in caseswhere monetary limits are less than Rs.5 lakhs, appeals to the SupremeCourt should be avoided except in certain extraordinary circumstances. 15. Learned senior counsel for the Department has alsopointed out that while the question of whether the replacement of one or https://hcservices.ecourts.gov.in/hcservices/ more machines out of the several machinery contained in the mill would bemerely a revenue expenditure or capital expenditure may have beenacceptable for the past period when the concept of block of assets was notthere in the statute, i.e., prior to assessment year 1988-89, but each andevery asset was looked at separately; the situation is now different. Itis also their case that in view of Section 2 (11) of the Act, the writtendown value of the block as a whole has to be taken into account. In atextile mill, the entire block of machinery would fall within a singleblock of assets, resulting in diminution of the value of the block by thesale value of the old machinery sold, and increase in the value of theblock by the purchase price of the new machinery. When each of thetextile machinery in question, such as ring frames, speed frames, cardingmachine, autoconer etc. are purchased for the first time, it is acceptedby both parties that it is a capital asset on which depreciation should begranted. The dispute only comes to play when some of the worn out or outdated machines are sold and replaced with new machines. 16. It is the argument of the Revenue that while under thelaw as it stood prior to 1988-89, the fact of treating the entire mill asan integrated unit may have had the effect of treating the replacement ofmachinery as replacement of parts of a larger whole and thus treated asrevenue expenditure, once the concept of block of assets has been broughtin by the Parliament, from assessment year 1988-89, whether the mill is anintegrated whole or not, whether the replacement of machines resulted inincreased capacity or not will have no bearing. When any item belonging tothe block is removed, its value is reduced, and if any new item comes inits place, its value is added to the block. 17. The learned senior counsel for the Revenuehighlighted that the question of law in the batch is very wide in scopeinasmuch as it questions whether the Tribunal was right in treating thereplacement of machinery as revenue expenditure. The arguments relatingto the concept of depreciation on block of assets are only grounds raisedto strengthen the contentions of the Department that the replacement ofmachinery cannot be treated as revenue expenditure, and to point out howthe present situation after assessment year 1988-89 varies from the law asit stood earlier, and therefore none of the case laws cited by and reliedon by respondents would have any bearing on the present cases, which allrelate to assessment years subsequent to 1988-89. It is also projected bythe Revenue that most of the case law on the issue of replacement oftextile machinery were rendered in the context of the law as it stoodprior to the introduction of the concept of Block of Assets. The fewcases that were decided thereafter, were decided on the basis that it is acovered issue, without the fact of the law having been amended beingnoticed. Thus, the judgements should be treated as having been renderedper incuriam. 18. Before elaborating the contentions raised by variouscounsel on behalf of the assessees, it is relevant to note that on factual https://hcservices.ecourts.gov.in/hcservices/ aspect it is their main contention that the entire spinning mill rightfrom Blow Room to the Cone Winding section is an integral plant for whichthe counsel for the assessees produced several materials and one amongthem is the report of the South India Textile Research Association(SITRA), Coimbatore. Their letter dated 19-12-2003 which was pressed intoservice before the Tribunal as well as this Court clearly show that theprocess of fibre to yarn conversion comprises of various stages and allthe processes are inter-linked. It also shows that the output fromvarious intermediate stages of production cannot be sold or marketed andused for other purposes. The following is the text of the letter dated19-12-2003 by SITRA:"THE SOUTH INDIA TEXTILE RESEARCH ASSOCIATION December 19, 2003 TO WHOMSOEVER IT MAY CONCERN It is a Textile Spinning Mill, cotton fibres areconverted into yarn. The process of fibre to yarn conversioncomprises of various stages as detailed below:1. Blow Room: The raw material (fibres) is opened and cleaned in theBlow Room with the help of various openers and beaters. Duringthis process, the raw material is converted into lap (rolledsheet form). Majority of the heavier trash particles andmicrodust in raw cotton are removed in Blow Room.2. Carding Process: The blow room laps, are then fed to cards. In thecarding process, the fibres are individualised and convertedinto sliver (Card Sliver). In this process also impurities areremoved. 3. Lap Former: A specified number of Card Slivers are fed into lappreparatory machines to form a spool of lap sheet, which in turnform the feed for the next process (i.e ) Combing. 4. Combing Process: Combing machines remove short fibres and produce aclean and uniform sliver (Comber sliver).5. Drawing: In the next sequence, combed slivers are doubled anddrafted on machine called Draw Frame. Draw Frames evenout theirregularities in the sliver.6. Fly Frames: The Draw Frame Slivers, are fed to fly frames whichdraft and twist these slivers into roving, and then wound on https://hcservices.ecourts.gov.in/hcservices/ Bobbins.7. Ring Frames: Roving bobbins are fed to Ring Frames which draftand twist the roving to form the final product i.e. yarn. Thisyarn is wound on cops mounted on spindles in the ring frame.8. Cone Winding: The output of the ring frames in the form of cops isfed to Cone Winding machines (conventional winder automaticwinder) which remove the various faults in the yearn with thehelp of Yarn Clearers and convert the yarn in cop form into aconvenient form of package called cones. In the post spinning section, besides the conewinding machines, depending upon the requirement of the market,reels and doubling machines (Ring Doublers or TFO Twisters) arealso used to convert yarn into suitable packages (Reeledyarn/Doubled yarn). We would therefore like to certify that all theabove processes are inter-linked and the output from variousintermediate stages of production (Carding, Combing and DrawFrames Slivers and Roving) cannot be sold or marketed and usedfor other purposes. The output from Ring Frames in the form ofcops also cannot be sold in the market. In the absence of anyof these processing, yarns could not be spun. Only after theyarn is wound and finished into suitable packages, can it besold in the market. Hence, a spinning mill is considered to becontinuous process industry. Considering these facts, the entire spinning mill,right from Blow Room to the Cone Winding section should beconsidered as a single integrated plant. Yours faithfully, Sd/- D. Shanmuganandam Assistant Director." The above conclusion of the SITRA being a specialised body in the field ofcotton textile and spinning cannot be ignored lightly. 19. Most of the counsel appearing for the assesseescontended that the Appellate Tribunal had rendered factual finding thatthe expenses related to purchase of machinery parts such as ring frames,simplex machines, doubling machines, cone winder, electronic yarn cleaner,card conversion equipment, speed motors etc., were allowable as revenueexpenditure by upholding the finding of the Commissioner of Income TaxAppeals. It is also their claim that considering the factual findingwhich is same as the one concluded for the immediate preceding year thesame cannot be re-agitated before this Court in the absence of any further https://hcservices.ecourts.gov.in/hcservices/ finding contrary, or material or change of law. The said contention of thecounsel for the assessees cannot be brushed aside. It is also brought toour notice that the Income-tax Tribunal had allowed similar claim afterconducting personal inspections in the spinning mills, which replacedparts. It is also stated that inasmuch as the question raised now by thedepartment had been settled by series of decisions of this Court as wellas the Apex Court and where long standing precedents settled the Law, theCourts would be slow to disturb the said Law unless there are compellingreasons to do so. Learned counsel appearing for the assesses have citedand demonstrated before us number of judgements (decisions)wherein theexpenses of similar nature were held allowable:1. Ten Ring 1.T.C.P.No.499 of 1997 dt.14-12-1998 filed Frames by the department against the order of the Income Tax Appellate Tribunal in ITA No.3128/MDS/92 dt. 18-8-93 dismissing the Case of the department involving identical claim. 2.CIT Vs. GITANJALI MILLS LTD (265 ITR 681) (Mad) 3. CIT Vs. TUTICORIN SPINNING MILLS (249 ITR 695) (Mad) 4. CIT Vs. SRI BHAGAVATHI TEXTILES LTD., (207 ITR 226) (Kerala) 5. CIT Vs. MAHALAKSHMI TEXTILES LTD., 56 ITR 256 (Mad) and 66 ITR 710 (SC)2. Four set of 1. CIT Vs. SALEM CO-OPERATIVE Card conversion SPINNING MILLS (148 ITR 176) 2. VANAJA TEXTILES Vs. CIT (208 ITR161) 3. Cone Winder 1. CIT Vs. SRI RANI LAKSHMI GINNING SPINNING WEAVING MILLS (256 ITR 592) 2. TUTICORIN SPINNING MILLS Vs. CIT (261 ITR 291) 3. CIT Vs. SRI HARI MILLS (P) LTD., (237 ITR 188)4. Electronic 1. TUTICORIN SPINNING MILLS Vs. Yarn Cleaner CIT (261 ITR 291) https://hcservices.ecourts.gov.in/hcservices/

2. CIT Vs. SAKTHI TEXTILES (250 ITR 449)." 20. In the following judgements, the expenses of similar naturewere held allowable: "1. CIT Vs. GITANJALI MILLS LTD (265 ITR 681) (Mad) 2. CIT Vs. TUTICORIN SPINNING MILLS (249 ITR 695) (Mad) 3. CIT Vs. SRI BHAGAVATHI TEXTILES LTD., (207 ITR 226) (Kerala) 4. CIT Vs. MAHALAKSHMI TEXTILES LTD., (56 ITR 256 (Mad) and 66 ITR 710 (SC) 5. CIT Vs. SALEM CO-OPERATIVE SPINNING MILLS (148 ITR 176) 6. VANAJA TEXTILES Vs. CIT (208 ITR 161) 7. CIT Vs. SRI RANI LAKSHMI GINNING SPINNING WEAVING MILLS (256 ITR 592) 8. TUTICORIN SPINNING MILLS Vs. CIT (261 ITR 291) 9. CIT Vs. SRI HARI MILLS (P) LTD.,(237 ITR 188) 10. TUTICORIN SPINNING MILLS Vs. CIT (261 ITR 291) 11. CIT Vs. SAKTHI TEXTILES (250 ITR 449)It is also useful to refer the judgements of this Court in the case ofTUTICORIN SPINNING MILLS LTD., CIT (261 ITR 291), CIT Vs. KARTHIKEYASPINNING MILLS (265 ITR 285), CIT Vs. GITANJALI MILLS LTD., (265 ITR 681)and the recent judgement of the Rajasthan High Court in CIT Vs. UDAIPURDISTILLERY CO., LTD.,(268 ITR 451). By applying the ratio of the Hon'bleSupreme Court in CIT Vs. MAHALAKSHMI TEXTILES LTD.,(66 ITR 710) (SC), andin ALEMBIC CHEMICAL WORKS LIMITED Vs. CIT (177 ITR 377 (SC), this Courthas held that the expenditure of this nature is revenue expenditure. 21. It is also demonstrated before us that Ring frame and Drawframe cannot work independently. Likewise, Carding machine cannot workindependently, but can work only as part of spinning unit. Almost all thedecisions cited on the side of the assessees are directly on the issues https://hcservices.ecourts.gov.in/hcservices/ before this Court, namely, the replacement of machinery such as Cardingmachine, Ring frame and Draw frame which are only part of a plant whichmanufactures yarn and therefore allowable as revenue expenditure under theAct. Therefore, the Tribunal was right in allowing a deduction of amountspent on replacement of machinery. This issue has been settled in thefollowing decisions of this Court: 1) CIT Vs. TUTICORIN SPINNING MILLS LTD., (249 ITR 694) (Mad) 2) CIT Vs. GITANJALI MILLS LTD., (265 ITR 681) 3) CIT Vs. SRI HARI MILLS PVT. LTD(237 ITR 188 (Mad) 4) VANAJA TEXTILES LTD.,Vs. CIT (208 ITR 161 (Ker) 5) CIT Vs. SHRI RANILAKSHMI GINNING SPINNING AND WEAVING MILLS LTD (256 ITR 592) (Mad) 6) CIT Vs. SAKTHI TEXTILES LTD (262 ITR 375)(Mad) 22. Now we shall consider whether the claim is allowableeither under Section 31 of Income Tax Act, 1961 as "current repairs" or as"revenue expenditure" allowable under Section 37 of the Act (similarprovisions of Section 10 (2) (v) and Section 10 (2) (xv) of the IndianIncome Tax Act, 1922. The following judgement of the Supreme Court in thecase of CIT Vs. KALYANJI MAJVI & CO., [(1980) 122 ITR 49 at page 53] isrelevant: ".....The repairs made by the assessee, it is said,cannot be described as "current repairs". Now, thiscontention rests on the principle that if a special provisioncovers the case, resort cannot be had to a general provision.It seems to us that if the renovation of the building, thereconditioning of machinery and the removal of debris cannot bedescribed as "current repairs"- and we assume that to be so-thecase would be entitled to consideration under section 10 (2)(xv). Section 10 (2)(v) deals with current repairs only. Thesubject matter of section 10 (2) (v) is “current repairs” andit appears difficult to agree that repairs which are not“current repairs” should not be considered for deduction ongeneral principles or under section 10 (2) (xv). There must bevery strong evidence that in the case of such repairs, theLegislature intended a departure from the principle that anexpenditure, laid out or expanded wholly and exclusively forthe purposes of the business, and which expenditure is notcapital in nature, should not be allowed in computing theincome from business. There is nothing in the language of https://hcservices.ecourts.gov.in/hcservices/ section 10(2)(v) which declares or necessarily implies thatrepairs, other than current repairs, will not qualify for thebenefit of that principle. We must remember that on acceptedcommercial practice and trading principles an item of businessexpenditure must be deducted in order to arrive at the truefigure of profits and gains for tax purposes. The Rule washeld by the Privy Council in CIT Vs. CHITNAVIS (1932) 2 CompCase 464; LR 59 IA 290; AIR 1932 PC 178 to be applicable in thecase of losses, and it has been applied by the Courts in Indiato business expenditure incurred by an assessee. MOTIPUR SUGARFACTORY LTD., Vs. CIT (1955) 28 ITR 128 (Pat) and DEVI FILMSLTD., Vs. CIT (1970) 75 ITR 301 (Mad). The principle foundfavour with this Court in BADRIDAS DAGA Vs. CIT (1958) 34 ITR10, 15 (SC) and CALCUTTA CO., LTD., Vs. CIT (1959) 37 ITR 1, 9(SC). If the contents of that rule be true on generalprinciple, there is good reason why the scope of Section 10 (2)(xv) should construed be liberally. In our opinion, even ifthe expenditure made by the assessee in the present case cannotbe described as "current repairs" he is entitled to invoke thebenefit of section 10 (2) (xv)." 23. All plant and machineries put together amount to acomplete spinning mill which is capable of manufacturing yarn. Hence eachreplaced machine cannot be considered as an independent one, and nointermediate marketable product is produced. This is evident from thedecision in CIT v. COOPERATIVE SUGARS LTD., [235 ITR 343] (Kerala). It isalso not in dispute that there is no increase in the production quantity.Replacement of worn out part does not itself being in a new assets andalso there is no replacement of whole unit. As rightly argued, purchase asa part of plant and of thing which may independently be used is notdecisive test. It must be seen that the replacement is for the purpose ofrunning the mill. No new assets created in the process of replacement ofworn out machine. 24. In ADDL. CIT v. INDIA UNITED MILLS LTD. (Bom), the Courtheld that replacement of worn out doors by fire proof doors and ordinarylighting by fluorescent tubes is revenue expenditure and no advantage ofenduring nature acquired. In fact in Circular No.69 dated 27-11-1957 theBoard has stated that the correct procedure is that the initialexpenditure on the first installation of fluorescent lights, including theexpenditure on wiring and fittings should be treated as capitalexpenditure as it creates an asset and that all subsequent expenditure forreplacement of the tubes should be treated as of a revenue natureallowable in toto under Section 37 (1). This principle squarely appliesto the cases of replacement of worn out machinery. It is also pertinentto note that the Supreme Court in UCO Bank case [237 ITR 889] (SC)] heldthat Circulars are binding on the department. Therefore what applies forreplacement of fluorescent tubes applies to all replacement of machineriesas well. In CIT v. UDAIPUR DISTILLERIES CO. LTD., [268 ITR 451 (Raj)] https://hcservices.ecourts.gov.in/hcservices/ replacement of old transformer by a new one has been held to be revenue innature. 25. As discussed earlier, the issues involved in thesereferences and appeals relate to replacement of machineries done in one ormore of the several process of a Textile Industry namely Spinning Mill.In the case of spinning mills cotton fibres are converted into yarn andonly after the yarn in wound and finished into suitable packages the samecan be marketed. Considering the stages of process and the nature ofprocess involved and the facts that the output of intermediary product isnot marketable and further the fact that the output of one process becomesthe input of the next process thereby making the entire process as anintegrated one. The process involved in a spinning mill may be brieflysummarised as under: 1. Mixing 2. Blow Room 3. Carding 4. Combing 5. Drawing 6. Simplex (Ring frames) 7. Cone Winding 8. Reeling 9. PackingIn the above process raw cotton is mixed in the mixing room and then theimpurities are removed in the Blow room and after entering furtherprocesses cotton is converted into yarn and then packed. This Court inMAHALAKSHMI Mill's case [56 ITR 256 (Madras)] (supra) has held thatreplacement of worn out parts of Textile Machinery by introducingCasablanca High Drafting system is a revenue expenditure. While doing so,the Court observed at page 262 of the judgement that "when it came to thequestion of replacing the worn out roller stands, the assessee found theold type of replacement parts could not, therefore be secured, and theTribunal in the statement of case also refers to the fact that whereversuch parts were available; they were costlier than the parts produced by adifferent manufacturer that is the Casablanca company. Though according tothe manufacturers, the provision of these parts was referred as theCasablanca, High Drafting system; it virtually amounted to nothing morethan the replacement of certain parts, which however were a modifiedversion of the older parts. The progress of textile technologynecessarily discards and unwieldy parts and seems to replace them withlighter and more efficient parts. 26. This Court in recent times had occasions to decide on theissue of replacement of textile machinery whether it is in the capitalfield or Revenue field and it has consistently held that the replacementof textile machinery in a Spinning Mills are revenue expenditure. 27. Further this Court in GITANJALI MILLS LTD.,v. COMMISSIONEROF INCOME TAX, reported in 265 ITR 681 (Madras) held that the ring frames https://hcservices.ecourts.gov.in/hcservices/ have no independent existence or utility unless worked with othermachines, that its function is ancillary, that it is only a supportingmachine, used for drafting twisting and winding the yarn, that they bythemselves are not machines capable of independent function, and thereforethe cost incurred on such ring frames is not dissimilar in nature andcharacter say to the replacement of a radiator or a carburettor in a motorengine. 28. Further, the Kerala High Court in the case of VANAJATEXTILES v. COMMISSIONER OF INCOME TAX [208 ITR 161 (Kerala)] has heldthat expenditure on modernisation allowable as revenue expenditure. Inthe Textile industry old machineries having functioned for few decadeswere either worn out or where in the process of getting worn out and hencenecessitated replacement in order to keep pace with the competing world.Therefore, the High Court after referring to various decisions of EnglishCourts held that "In these cases also as in the case of ALEMIC CHEMICALWORKS (1989) 177 ITR 377 (SC), the comprehensive scheme of modernisationand rehabilitation is for improvement in the operation of an existingbusiness and its efficiency and profitability not removed from the area ofthe day-to-day business of the assessee's established enterprise. Thereis no fresh or new venture in the scheme of modernisation envisaged by theassessee. Further the Court held that it is not the largeness of the sumthat it is important but the nature of the expenditure and therefore heldthat the expenditure in these field were revenue in nature. 29. All the machineries though independent on their own, areall part of an integrated whole, namely, the textile plant. What is fedin as cotton bales, after going through the series of processes,ultimately results in cotton yarn which alone is the marketable commodity.It is convincingly argued before us that the said principle applies tosugar industries as well, where the ultimate product is sugar. Thisproposition has been upheld in RHODESIAN RAILWAYS (1 ITR 227) (PC) (1933)through MAHALAKSHMI TEXTILES MILLS LTD., (66 ITR 710) (SC) (1967) tillUDAIPUR DISTILLERY CO. LTD., (268 ITR 451) (Rajasthan) (2003) followingthe Supreme Court decisions in MAHALAKSHMI TEXTILES 66 ITR and ALEMBICCHEMICAL WORKS (177 ITR 377 (SC). At this juncture, the letter dated 19-12-2003 of SITRA, being the specialised body in the field of cottontextile and spinning is to be taken note of wherein the Body has reportedthat entire operation right from Blow Room to Cone Winding section is tobe considered only as a single plant. 30. With reference to the contentions of the learned seniorcounsel for the department, it is stated that whether a particularexpenditure is in the capital field or revenue field cannot be decided onthe basis of the inclusion in the depreciation schedule. The depreciationschedule will be relevant only after the question as to whether theexpenditure is in the revenue field or capital field. If the expenditureis found to be in the capital field and is eligible for depreciation, thenonly the depreciation schedule is to be looked into for determining the https://hcservices.ecourts.gov.in/hcservices/ rate at which depreciation can be granted. If in the alternative it isfound that the expenditure is in the revenue field, the question ofreferring to the depreciation schedule for finding at the rate ofdepreciation will not arise. In the circumstances, it is the claim of theassesses that the reliance of the revenue on the depreciation schedule tosupport their contention is misconceived and does not, in any way, advancethe case of the department. As rightly pointed out, the Revenue has notbrought out any error either in law or on facts in the decision renderedby the Tribunal. 31. The department, in the course of their arguments, reliedheavily on MADRAS CEMENTS case, reported in 255 ITR 243 and BALLIMAL NAVALKISHORE v. CIT (224 ITR 414) (SC). The following observation in theformer decision is relevant: (page 248) ".....Replacement is different from repair.Replacement implies the removal or discarding of the thingthat was in use, by a different or new thing capable ofperforming the same function with the same, lesser or greaterefficiency. The replacement of a section in a series ofmachines which are interconnected, in a segment of theproduction process which together form an integrated wholemay, in some circumstances, be regarded as amounting to repairwhen without such replacement that unit in that segment willnot function. That logic cannot be extended to the entiremanufacturing facility from the stage of raw material to thedelivery of the final finished product."In the above case (Madras Cements case), what the assessee has done is todiscontinue the use of four old mills which had been installed about 10 to15 years earlier, and had installed at a different location a new cementmill which was technologically more advanced, was more energy efficientand which could make a qualitatively superior produce. What was done bythe assessee was not to repair the cement mill that it had alreadyinstalled. The existing mill was completely discarded. A new mill wasestablished at a different location. In such a circumstance, the DivisionBench held that the assessees claim that the installation of the newCombidan cement mill was a "repair" to the whole of the cement factoryitself, is not a claim which falls within the scope of Section 31 (i) ofthe Act. According to the Division Bench, the new mill was by itself anintegrated mill and this new mill was meant to be used at the stage wherethe clinker had been obtained from the limestone. It is only after theclinker was subjected to milling that the final marketable product,namely, cement was to be obtained. Such a new cement mill is incapable ofbeing regarded as constituting repair to all the earlier stages in themanufacture of cement. In such a circumstance, the Division Bench heldthat in pursuance of a modernisation programme whereby four existingcement mills which were considered outdated by the assessee and werereplaced by this new mill, was an amount paid on 'current repairs' and was https://hcservices.ecourts.gov.in/hcservices/ allowable under section 31 of the Act. Accordingly, the Division Benchanswered the referred question in favour of the Revenue and against theassessee. As rightly pointed out by the learned counsel for theassessees, in that case it was not replacement of machinery but setting upof a unit in a geographically new location. Hence, the factual positionin that case is different and it has no application to the facts of thecases on hand. Hence, the said decision relied on by the Revenue is notapplicable to the cases on hand. 32. As rightly pointed out, in the case of BILLIMAL NAVALKISHORE Vs. CIT (224 ITR 414) (SC), the facts were totally different thata ginning factory was converted into a cinema theatre in 1945, that thetheatre had to be closed during the period from 1960-1961 for effectingthe extensive repairs, and that what the assessee did was not mere repairsbut a total renovation of the theatre. Hence the case in that decisionstands no comparison with the facts of the cases on hand. 33. It is the further contention of the department thatsince the machineries are new, have independent function and are ofenduring nature, and that therefore, the expenditure is capital in nature.To substantiate their claim, they relied on the decision in CIT Vs. MADRASCEMENT [255 ITR 243] (Madras) (cited supra) which we have alreadydiscussed. As rightly pointed out by the learned counsel for the assesses,the argument of the counsel for the Department that the machineries arenew and have independent function and are of enduring benefit are nolonger relevant in view of the categorical decision of the Supreme Courtin ALEMBIC CHEMICAL WORKS CO. LTD., Vs. CIT [177 ITR 377] SC) wherein ithas been held: (page 390 & 391) "The rapid strides in science and technology inthe field should make us a little slow and circumspect intoo readily pigeon-holing an outlay such as this ascapital..... ...There is also no single definitive criterionwhich, by itself, is determinative as to whether aparticular outlay is capital or revenue. The once for allpayment test is also inconclusive. What is relevant is thepurpose of the outlay and its intended object and effect,considered in a common sense way having regard to thebusiness realities. In a given case, the test of 'enduringbenefit' might break down".The Supreme Court has also held at page 386 that "The idea of "once forall" payment and "enduring benefit" are not to be treated as somethingakin to statutory conditions; nor are the notions of "capital" or"revenue" a judicial fetish. What is capital expenditure and what isrevenue are not eternal verities but must needs be flexible so as torespond to the changing economic realities of business. The expression"asset or advantage of an enduring nature" was evolved to emphasise the https://hcservices.ecourts.gov.in/hcservices/ element of a sufficient degree of durability appropriate to the context. 34. The learned counsel for the respondents drew our attention toa decision of the Supreme Court in CIT v. PODAR CEMENTS LTD., [226 ITR 625(SC) and submitted that it is now well settled that an ongoing Act likethe Income-tax Act has to be interpreted taking note of the advancement inscience and technology and not by the old views. Their Lordships have heldat page 647: "At this juncture, we can also refer to the judgmentcited by Mr. Syali regarding updating construction of thewords used in the statute. In State (through CBI New Delhi)v. S.J. Choudhary AIR 1996 SC 1491,1494; (1996) 2 SCC 428,this Court has quoted the following passage with approval insupport of updating construction: (page 433 of [1996] 2SSCC): "Statutory Interpretation by Francis Bennion, 2ndEdn. Section 288 with the heading "Presumption that updatingconstruction to be given" states one of the rules thus: (p.617) xxx xxx (2) It is presumed that Parliament intends the Court toapply to an ongoing Act a construction that continuouslyupdates its wording to allow for changes since the Act wasinitially framed (an updating construction). While itremains law, it is to be treated as always speaking. Thismeans that in its application on any date, the language ofthe Act, though necessarily embedded in its own time, isnevertheless to be construed in accordance with the need totreat it as current law.xxxx In the comments that follow it is pointed outthat an ongoing Act is taken to be always speaking. It isalso further, stated thus (p 618-619) In construing an ongoing Act, the interpreter is topresume that Parliament intended the Act to be applied atany future time in such a way as to give effect to the trueoriginal intention. Accordingly the interpreter is to makeallowances for any relevant changes that have occurred,since the Act's passing, in law, social conditions,technology, the meaning of words, and other matters. Justas the US Constitution is regarded as 'a livingconstitution', so an ongoing British Act is regarded as 'aliving Act'. That today's construction involves thesupposition that Parliament was catering long ago for astate of affairs that did not then exist is no argumentagainst that construction. Parliament, in the wording of anenactment, is expected to anticipate temporal developments. https://hcservices.ecourts.gov.in/hcservices/ The drafter will try to foresee the future, and allow for itin the wording. An enactment of former days is thus to be readtoday, in the light of dynamic processing received over theyears, with such modification of the current meaning of itslanguage as will now give effect to the original legislativeintention. The reality and effect of dynamic processingprovides the gradual adjustment. It is constituted byjudicial interpretation, year in and year out. It alsocomprises processing by executive officials."In this connection, the learned counsel for the assessees invited ourattention to the observations of the Supreme Court in (1987) 1 SCC 395M.C. MEHTA v. UNION OF INDIA: "As new situations arise the law has to be evolvedin order to meet the challenge of such new situations. Lawcannot afford to be Static. We have to evolve newprinciples and lay down new norms which would adequatelydeal with the new problems which arise in a highlyindustrialized economy".In the cases under consideration by the Hon'ble Bench, it isadmitted that there is no capacity addition. Thereplacement has been made only to restore the machinery toits original state of efficiency so that the entireintegrated manufacturing unit which is considered as aprofit-making apparatus functions efficiently and producesquality products. Therefore the concept of 'currentrepairs', 'modernisation' and 'expenditure laid out orexpended wholly and exclusively for the purpose of thebusiness' have to be interpreted following the principle ofupdating construction taking note of the business needs andcommercial expediency especially in a competitive businessenvironment created by the globalization and not by applyingold concepts of what is capital and what is revenue. Thepath-breaking decisions in Empire Jute (supra) and AlembicChemicals (supra) have paved the way for such aninterpretation. 35. In CIT v. COOPERATIVE SUGARS LTD. [235 ITR 343 (Ker)]it has been held in Para 9 and 10 as under: "The sugar mill is a gigantic plant. The AOshould not have been swayed by the extent of expenditureincurred on major components purchased for replacing the oldones. The vital question is whether the sugar mill can workin the absence of machinery, expenditure incurred on which isclaimed by the assessee. The question has to be answered inthe negative. For the manufacture of sugar, all the machineryclaimed are necessary. No doubt the expenditure was incurred https://hcservices.ecourts.gov.in/hcservices/ on the principal components of the sugar mill, still,however, it would be wrong to hold each machinery as anindependent unit. All machinery put together completes thesugar plant. We therefore entirely agree with the view takenby the Tribunal. ...No doubt, expenditure was incurred on substantialreplacement, but the fact remains that the sugar plant wasthere and the same plant existed even after replacement and,therefore it is wrong to say that any new asset of enduringnature has come into existence. Whether or not a new assethas come into existence this question has to be consideredvis-a-vis the integrated sugar plant and not vis-a-vis eachintegral part of it. When expenditure incurred on technicalknow-how on consideration of "once for all payments" was heldto be the expenditure as revenue in nature in the case ofAlembic Chemical works (supra), we see no reason whyexpenditure incurred on purchase of new machinery to ensuresound functioning of the sugar mill to replace the old ones,should not be held as revenue expenditure."The above decision was dissented from in the MADRAS CEMENT's Case (supra)because Their Lordships felt that the language of section 31 would notsupport such a construction. It is relevant to submit that though thewords 'machinery maintenance' was used there, nowhere in the Keraladecision any particular section was mentioned to support its conclusion.It is also relevant to submit that this Court subsequent to MadrasCement's case, in CIT v. GITANJALI MILLS LTD., [265 ITR 681 (Madras)]allowed the expenditure on replacement of worn out machineries as revenuein nature after reframing the question by substituting Section 37 insteadof Section 31. This will show that the expenditure under considerationcan fall to be considered under 'current repairs' or as an 'expenditurelaid out or expended wholly and exclusively for the purpose of thebusiness'. 36. It is brought to our notice that various High Courts haveheld that expenditure incurred in the replacement of a Petrol engine by aDiesel engine is revenue in nature. Though the Diesel engine isindependent machinery with an independent function replacement of it hasbeen held to be revenue expenditure in the following decisions: 1. HANUMAN MOTOR SERVICE v. CIT (66 ITR 88) (Mys) 2. CIT v. KHALSA NIRBHAI TRANSPORT CO. (P) LTD. (82 ITR 741 (P & H). 3. ADDL.CIT v. DESAI BROS (108 ITR 14 (Guj) 4. NATHMAL BANKATLAL PARIKH &CO. v.CIT (122 ITR 168 (AP-FB) 5. CIT v. POLYOLEFINS INDUSTRIES LTD (169 ITR 538)(Bom) 6. CIT v. HINDUSTAN SANITARYWARE INDUSTRIES LTD. https://hcservices.ecourts.gov.in/hcservices/ (106 CTR 268) (Cal) 7. CIT v. TEA ESTATE (P) LTD., (198 ITR 535 (Cal)8. CIT v. MOHD. ISHAQUE, MOHD. GULAM (210 ITR 817)(MP)9. CIT v. JAFARBHAI AKBARALI & BROS (211 ITR 496)(Bom) 37. Regarding the argument relating to "block of assets", it isthe claim of the learned counsel for the assesses that the said principleor object of introduction of the above concept is totally not applicablerelating to the nature of expenditure incurred by the respondent. Theseprovisions were introduced from 2-4-1987 as defined under Section 2 (11)of the Income Tax Act, 1961 and they are in operation on different field.It is stated that they were intended to replace the provisions ondepreciation of capital assets. The block of assets concept wereintroduced with view to streamline the excess depreciation allowed and toallow terminal depreciation. When the block of assets concept wereintroduced, the provisions relating to terminal depreciation and theprofit result from sale of assets, which were originally considered undersection 32 (1) (iii) and 41 (2), were suitably amended to fall in linewith the proposed simplification of the concept of block of assets. Thecircular describing the concept of block of assets is explained by theCentral Board of Direct Taxes by Circular No. 469 dated 23-09-1996reported in 162 ITR St.24. In the instant case, no acquisition of any newasset, much less capital of any enduring advantage resulted to theassessee respondent. The assessees replaced the worn out part ofmachineries without discontinuing its production activities. No claim fordepreciation was ever made before any authorities either by the assesseesor by the revenue to consider the question as block of assets nor wasthere any necessity to do so. The department did not raise any objectionbefore the Tribunal regarding the claim of allowance on the premise ofblock of assets of concept. It is, therefore stated that such questiondoes not arise out of the order of the Appellate Tribunal for consideringthe same by this Court under Section 260A. It is submitted that no suchquestion was also raised in the Tax Case Appeal. (Vide DEPUTY COMMISSIONEROF INCOME TAX v. VELLORE CO-OPERATIVE SUGAR MILLS LTD., (242 ITR 170)(Mad), CIT v. TATA CHEMICALS LTD., (256 ITR 395 at 398) (Bom), CIT v.DINERS CLUB INDIA LTD., (248 ITR 679 at 680) (Bom) and M. PAPPU PILLAI v.ITO (243 ITR 726 at 730) (Ker). It is submitted by the respondents thatthey incurred expenditure for replacing the worn out machineries of itsTextile Mill in order to maintain its production activity without breakdown and keep pace with the requirements of the industry. Further byincurring the said expenditures it will be evident from the facts that theinstalled capacity of the mill has not enhanced or increased in any mannerand hence the question of the respondents getting any enduring benefitdoes not arise. The revenue has accepted that the machineries replaced ina textile mill are part of an integrated process in the unit. It will bepertinent here to note that the question of the depreciation allowancecomes under the ambit of section 32 of the Income Tax Act, 1961, whereasthe claim made by the assessees falls under section 31 or 37. It issubmitted that the judgments of various High Courts dealing with this https://hcservices.ecourts.gov.in/hcservices/ question is uniform falling in line with the decisions of this Court.Hence the interpretation of an All India Legislation like the Income TaxAct being an uniform one the revenue had not placed any fresh material orevidence to take a fresh look on the self same issue. Further, themachineries replaced were not independent machineries capable of functionindependently and that they are inter-dependent in an integrated process.This factual finding is not rebutted by the revenue, and hence this factis undisputed and binding on the Department. In this connection, it is tobe noted that the law relating to the block of assets concept, which wasintroduced in the year 1987, remained same even during the assessment yearunder consideration in view of the legal position that the nature of theclaim was to be considered as allowable as expenditure. 38. It is also relevant to note that in the Scheme of the Act,Section 31 deals with 'current repairs', Section 32 deals with'depreciation on assets used for the purposes of business' and Section 37deals with allowance of 'business expenditure' not in the nature ofcapital or personal expenditure. The contention of the Department seemsto revolve on the fallacious ground that these three sections operatealternatively. Rather, they have been conceived in a manner that theyfunction independent of each other. Hence, this argument of theDepartment would fall like nine-pins the moment the operation of theSections are considered in their own right. Assuming for a moment, thatthe learned senior counsel's arguments were correct, then Sections 31 and37 exists even after the introduction of 'block of assets' concept andhave not become otiose or redundant. In other words, with theintroduction of 'block of assets', Sections 31 and 37 according to theDepartment has become non-existent. Even otherwise, this Court inGITANJALI MILL's case [265 ITR 681], accepted the claim of the assesseefor the assessment year 1990-91, i.e., subsequent to the introduction of'block of assets' concept. 39. The question whether an item of expenditure is capital orrevenue is not determined by the treatment given in books of accounts orin the balance sheet. The claim has to be determined only by theprovisions of the Act and not by the accounting practice of the assessee.It has been held in the following cases for the purpose of income taxwhich is concerned with determining the real income, the entries in abalance sheet required to be maintained in the statutory form is notconclusive: 1) UCO BANK v. CIT (240 ITR 355) (SC) 2) KEDARNATH JUTE MFG CO. LTD. Vs. CIT (82 ITR 363) (SC) 3) CIT vs. SOUTHERN ROADWAYS LTD., (265 ITR 404)(Mad) 4) CHEMICALS & PLASTICS LTD.,v. CIT (2002) (125) Taxman 648 (Mad). https://hcservices.ecourts.gov.in/hcservices/

40. Finally, almost all the counsel appearing for theassessees have brought to our notice that the department having acceptedsimilar decisions on earlier occasions, particularly in the case of sameassessees, they are not justified in challenging the same without justcause. It is also contended on the side of the assessees that the revenuehas not appealed to the Supreme Court in several cases including JayaramMills Limited and Geetanjali Mills Ltd., and also stated that any of thecases where this Court has decided against them, the Revenue has not filedany appeal to the Supreme Court. By drawing our attention to the decisionof the Supreme Court in BERGER PAINTS INDIA LIMITED v. Commissioner ofIncome Tax [266 ITR 99](SC), it was argued that the present set ofappeals by the Revenue is not maintainable. In DEPUTY COMMISSIONER OFINCOME TAX v. VELLORE COOPERATIVE SUGAR MILLS [242 ITR 170](Mad), thisCourt has allowed that where a question has already been settled by Court,appeal arising out of the same question is not maintainable. In UNION OFINDIA v. SATISH PANALAL SHAH [249 ITR 221], the Supreme Court, whiledepricating the revenue in not filing appeal against the previous ordersand challenging the same in one year, held: (page 222) "If the Revenue did not accept the correctness ofthe judgment in the case of PRADIB RAMANLAL SHETH [1993] 204ITR 866 (Guj), it should have preferred an appeal thereagainstand instructed counsel as to what the fate of that appeal wasor why no appeal was filed. It is not open to the Revenue toaccept that judgment in the case of the assessee in that caseand challenge its correctness in the case of other assesseeswithout just cause..." Similar view has been expressed by the Supreme court in CIT v. NARENDRADOSHI [254 ITR 606] (SC); and CIT v. SHIVSAGAR ESTATE [257 ITR 59] (SC).It is also worthwhile to refer a decision of the Supreme Court in BERGERPAINTS INDIA LTD., v. C.I.T [266 ITR 99] (SC), wherein the Supreme Courthas held that the Revenue has not challenged the correctness of the lawlaid down by the High Court and has accepted it in the case of oneassessee, then it is not open to the Revenue to challenge its correctnessin the case of other assessees, without just cause. It is not in disputethat the very same issue/point has been considered by this Court invarious decisions in favour of the assessees and against the Revenue,admittedly, those decisions have not been taken up by way of appeal to theSupreme Court. In such a circumstance, the objection of the learnedcounsel for the assessees is well-founded. 41. Under these circumstances, in the light of the factualdetails as demonstrated before us, supported by acceptable documents andthe report of the specialised Body like SITRA and also considering variousjudicial pronouncements on the issue and in view of the time-tested lawlaid down in MAHALAKSHMI TEXTILE's case [Vol.66 ITR 710] (SC), we holdthat the claim of the assessees that replacement of parts of textile millis revenue expenditure is justified and deserves to be upheld. Based on https://hcservices.ecourts.gov.in/hcservices/ the submissions and arguments and in consonance with the decisions of theSupreme Court and this Court, as discussed above, we answer all thequestions raised against the Revenue in favour of the assessees.Consequently, the References are answered accordingly and dismiss all theAppeals filed by the Revenue and allow the Tax Appeals filed by theassessees. No costs. Consequently, all the miscellaneous petitions areclosed.Sd/-Asst. Registrar./true copy/Sub Asst. Registrar.R.B.To:-1. The Assistant RegistrarIncome Tax Appellate Tribunal,Rajaji Bhavan III floor,Besant Nagar, Chennai-90. (with records) (5 copies)2. The Secretary Central Board of Direct TaxesNew Delhi (3 copies)3. The Commissioner of Income Tax,Madurai.4. The Commissioner of Income Tax,Special Range, Coimbatore.5. The Deputy Commissioner of Income Tax,Special Range, Madurai.6. The Commissioner of Income Tax,Coimbatore.7. The Commissioner of Income Tax,Trichi.8. The Commissioner of Income Tax,Tirupur. https://hcservices.ecourts.gov.in/hcservices/

9. The Joint Commissioner of Income Tax,Special Range-II, Coimbatore.10. The Commissioner of Income Tax III,Coimbatore.11. The Commissioner of Income Tax-IChennai.12. The Commissioner of Income Tax IIIChennai.13. The Deputy Commissioner of Income Tax,Special Range-I,Madurai.14. The Commissioner of Income Tax,(Appeals-I)Madurai Range, Madurai.15. The Commissioner of Income Tax,(Appeals-II)Madurai.17. The Commissioner of Income Tax, (Appeals)Coimbatore.18. The Commissioner of Income Tax, (Appeals I)Coimbatore.19. The Commissioner of Income Tax, (Appeals II)Coimbatore.20. The Commissioner of Income Tax, (Appeals)Madurai.21. The Commissioner of Income Tax, (Appeals VII)Madras.22. The Commissioner of Income Tax, (Appeals)Madras.23. The Commissioner of Income Tax, (Appeals IV)Chennai.24. The Deputy Commissioner of Income Tax, Special Range II, Madurai. https://hcservices.ecourts.gov.in/hcservices/

25. The Assistant Commissioner of Income Tax,Company Circle, Madurai.26. The Deputy Commissioner of Income Tax, Special Range I,Coimbatore.27. The Deputy Commissioner of Income Tax, Special Range I, Madurai.28. The Jt Commissioner of Income Tax, Special Range II,Coimbatore.29. The Assistant Commissioner of Income Tax, Circle I, Tirupur.30. The Deputy Commissioner of Income Tax, Special Range,Madurai.31. The Deputy Commissioner of Income Tax, Salary Circle I,Coimbatore.32. The Deputy Commissioner of Income Tax, Special Investigation Circle, Circle II,Coimbatore.33. The Jt Commissioner of Income Tax, Special Range II,Coimbatore.34. The Deputy Commissioner of Income Tax, Special Range (Cent)Madurai.35. The Assistant Commissioner of Income Tax, Central Circle, Madurai.36. The Deputy Commissioner of Income Tax, Special Range II,Madras.37. The Assistant Commissioner of Income Tax, Investigation Circle II,Madurai. https://hcservices.ecourts.gov.in/hcservices/

38. The Deputy Commissioner of Income Tax, Company Circle, IV (6),Chennai 6.39. The Jt. Commissioner of Income Tax,Circle.1, Tiruppur.40. The Income Tax Officer, Ward I(2). Virudhunagar.+ 35 ccs to Mrs.Pushya Sitaraman, Advocate (SR Nos. 21529 to 21532, 21550,20737, 20738, 20740, 20741, 20743, 20746 to 20752, 20754, 20755, 20759,20761, 20758, 20742, 20817 to 20819, 20824 to 20828, 20830 to 20833)+ 4 ccs Mr.K.Subramanian, Sr.C.G.Sc, (SR Nos.21109 to 21111, 21116)+ 4 ccs to Mr.N.Quadir Hoseya, Advocate (SR No.21596)+ 3 ccs to Mr.J.Balachander, Advocate (SR No.21229) + 14 ccs to Mr.P.P.S.Janarthana Raja, Advocate (SR No.21514)+ 4 ccs to Mr.R.Srinivasan, Advocate (SR 20782)+ 1 cc to Mrs.Hema Sampath, Advocate (SR No.21410) Tax Cases No.144/99 etc., and Tax Appeal No.46/2000 etc., batch Dt:- 29-4-2005.kk, km, bp, dv, sr, kaa/10.6.Com. gp, sr, nb