Sri Sree Satyanarayana Spinning Mills,, Tanuku v. The Ad CIT, Range-, Rajahmundry

ITA 309/VIZ/2008 | 2005-2006
Pronouncement Date: 21-01-2011 | Result: Allowed

Appeal Details

RSA Number 30925314 RSA 2008
Bench Visakhapatnam
Appeal Number ITA 309/VIZ/2008
Duration Of Justice 2 year(s) 7 month(s) 16 day(s)
Appellant Sri Sree Satyanarayana Spinning Mills,, Tanuku
Respondent The Ad CIT, Range-, Rajahmundry
Appeal Type Income Tax Appeal
Pronouncement Date 21-01-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted DB
Tribunal Order Date 21-01-2011
Assessment Year 2005-2006
Appeal Filed On 04-06-2008
Judgment Text
ITA 309/VIZ/2008 SREE SATYANARAYANA SPINNING MILLS TANUKU IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV JUDICIAL MEMBER AND SHRI BR BASKARAN ACCOUNTANT MEMBER ITA NO. 309/ VIZAG/ 20 08 ASSESSMENT YEAR : 2005 - 06 SREE SATYANARAYANA SPINNING MILLS TANUKU ADDL. CIT RANGE RAJAHMUNDRY (APPELLANT) VS. (RESPONDENT) PAN NO.AAFCS 1110D APPELLANT BY: SHRI V. JAGADISAN CA RESPONDENT BY: SHRI TH.L. PETER CIT(DR) ORDER PER SHRI S.K. YADAV JUDICIAL MEMBER : - THIS APPEAL IS PREFE RRED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A) ON VARIOUS GROUNDS BUT THEY ALL RELATE TO THE EXPENDITURE INCURRED IN REPAIR AND RENEWALS TO BUILDINGS AND PLANT & MACHINERY. FOR THE SAKE OF REFERENCE WE EXTRACT THE GROUNDS RAISED IN THIS APPEAL: 1. THE CIT(A) ERRED IN CONFIRMING THE ORDER OF THE LOWER AUTHORITY WITHOUT PROPERLY APPRECIATING THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE CIT(A) IS NOT CORRECT IN LAW AS WELL AS ON THE FACTS AND CIRCUMSTANCES OF THE CASE TO TREAT THE SUM OF RS.25 11 454/ - IN CURRED TOWARDS REPAIRS & RENEWALS TO BUILDINGS AS CAPITAL EXPENDITURE. 3. THE CIT(A) IS NOT CORRECT IN LAW AS WELL AS ON THE FACTS AND CIRCUMSTANCES OF THE CASE TO TREAT THE SUM OF RS.3 15 40 294/ - INCURRED TOWARDS REPAIRS & RENEWALS TO PLANTS & MACHINERY AS CAPITAL EXPENDITURE. 4. THE CIT(A) IS NOT CORRECT IN HIS CONCLUSION THAT THE EXPENDITURE IN QUESTION IS CAPITAL IN NATURE MERELY BECAUSE THERE WAS AN INSIGNIFICANT INCREASE IN THE NUMBER OF SPINDLES INSTALLED. 5. THE CIT(A) IS NOT CORRECT IN CONCLUDING THAT THE EXPENDITURE INCURRED BY THE APPELLANT IS CAPITAL IN NATURE MERELY BECAUSE THE QUANTITY OF PRODUCTION DURING THE YEAR WAS HIGHER THAN IN THE PRECEDING YEAR. 2. THE FACTS BORNE OUT FROM THE ORDER OF THE LOWER AUTHORITIES ON THE IMPUGNED ISSUE ARE THAT DUR ING THE COURSE OF ASSESSMENT PROCEEDINGS ASSESSING OFFICER HAS NOTICED THAT ASSESSEE HAS CLAIMED UNDER THE HEAD ITA 309/VIZ/2008 SREE SATYANARAYANA SPINNING MILLS TANUKU 2 REPAIRS & RENEWALS TO BUILDINGS OF RS.25 11 454/ - AND UNDER THE HEAD REPAIRS TO PLANT & MACHINERY OF RS.2 72 04 268/ - . HAVING NOTED THAT T HE REPAIRS AND RENEWALS EXPENDED TO THE BUILDINGS FOR THE RELEVANT ACCOUNTING YEAR HAD INCREASED SUBSTANTIALLY TO RS.25 11 454/ - FROM RS.6 32 042/ - FOR THE PRECEDING YEAR T HE A.O. SOUGHT TO EXAMINE THE VERACITY OF SUCH CLAIM AND ACCORDINGLY SOLICITED EXPL ANATION AS TO THE NATURE OF BUILDING REPAIRS AND RENEWAL WORKS UNDER TAKEN DURING THE RELEVANT YEAR. IT WAS EXPLAINED ON BEHALF OF THE ASSESSEE THAT SINCE THE FACTORY BUILDINGS ARE EXPOSED TO CONTINUOUS FATIGUE AND STRESS ON ACCOUNT OF THE VIBRATIONS FROM THE MACHINERY THEY HOUSE IT IS INDISPENSABLE TO CARRY OUT PERIODICAL REPAIR WORKS TO MAINTAIN SUCH BUILDINGS IN SAFE AND FIT CONDITIONS. BESIDES THE ROADS IN THE PREMISES AND THOSE LEADING TO OUTSIDE THE FACTORY THE COMPOUND WALLS FENCING BORE WELLS DRAINS ETC. NEEDED TO BE REPAIRED FOR THEIR UPKEEP AND HENCE THE ASSESSEE HAD CARRIED OUT DURING THE YEAR THE REPAIR WORKS TO THE FACTORY BUILDINGS ETC. WHICH ARE NECESSARILY TO BE TREATED AND ALLOWED AS CURRENT REPAIRS AS PER THE PROVISIONS OF THE I .T. STATUTE. IT WAS FURTHER SUBMITTED THAT NO ADDITIONAL CONSTRUCTION WAS UNDERTAKEN IN RESPECT OF THE FACTORY AND NON - FACTORY BUILDINGS AS IT IS EVIDENT FROM THE FACT THAT NO FRESH APPROVAL FROM THE LOCAL TOWNSHIP ADMINISTRATION OR THE INSPECTOR OF FACT ORIES HAD BEEN OBTAINED. STATING THUS THE ASSESSEE FURNISHED JOB - WISE DETAILS FOR VERIFICATION BY THE ASSESSING OFFICER. 3. AFTER EXAMINING THE EXPLANATION AND THE INFORMATION FURNISHED BY THE ASSESSEE THE ASSESSING OFFICER HOWEVER HELD THAT THE AS SESSEE DID NOT ENUMERATE THE NATURE OF THE JOBS UNDERTAKEN AND THEREAFTER REQUIRED THE ASSESSEE TO PRODUCE ALL THE CONNECTED BILLS AND SANCTION LETTERS FROM THE CONCERNED HEADS OF THE DEPARTMENTS FOLLOWING WHICH THE BILLS FOR EXPENDITURE TOWARDS MATER IALS SUCH AS CEMENT STEEL BRICKS ETC. WERE PRODUCED BUT NO SANCTION LETTERS COULD BE PRODUCED. WHEN REQUIRED FROM THE REPRESENTATIVE SHRI M. GOPALA KRISHNA SENIOR ACCOUNTS OFFICER TO DRAW INFERENCE FROM THE MATERIAL PRODUCED BY HIM AS TO WHETHER TH E WORKS UNDERTAKEN WERE IN THE NATURE OF NEW CONSTRUCTIONS OR JUST REPAIRS OF THE OLD ASSETS HE COULD NOT GIVE ANY DEFINITE ANSWER. THEREUPON THE ASSESSING OFFICER HELD THAT SINCE THE BURDEN LAY WITH THE ASSESSEE TO PLACE MATERIAL AND ITA 309/VIZ/2008 SREE SATYANARAYANA SPINNING MILLS TANUKU 3 EVIDENCES TO SUBST ANTIATE ITS CONTENTION THAT THE EXPENDITURES SO INCURRED WERE IN THE NATURE OF CURRENT REPAIRS AND NOT IN THE NATURE OF NEW CONSTRUCTION OR REPLACEMENT OF OLD CONSTRUCTION AND THE ASSESSEE HAVING NOT DISCHARGED ITS BURDEN ITS CLAIM OF EXPENDITURE IN THE NATURE OF CURRENT REPAIRS WAS NOT TENABLE. THE ASSESSING OFFICER THEN DISALLOWED THE ASSESSEES CLAIM BY TREATING THE WHOLE OF SUCH EXPENDITURE AS CAPITAL IN THE NATURE AND AFTER ALLOWING DEPRECIATION AT THE APPLICABLE RATE EFFECTED A NET DISALLOWANC E OF RS.22 60 309/ - . 4. AS REGARDS THE CLAIM OF REPAIRS AND RENEWALS EXPENDITURE IN RESPECT OF PLANT & MACHINERY THE ASSESSING OFFICER CALLED FOR THE RELEVANT INFORMATION AND THEREAFTER MADE A DESCRIPTIVE LIST OF 26 ITEMS OF MACHINERY TOGETHER WITH TH E INFORMATION RELATING TO THE RESPECTIVE DATES OF PURCHASE AND VALUES. ON CONSIDERING THAT ALL SUCH MACHINES WERE NEW AND WERE EXPECTED TO BESTOW ENDURING BENEFIT TO THE ASSESSEE HE HELD THAT THE AGGREGATE COST OF SUCH MACHINERY PARTOOK OF THE CHARACTER OF CAPITAL EXPENDITURE AND NOT IN THE NATURE OF CURRENT REPAIR RELATED TO REVENUE EXPENDITURE. ON SHOW - CAUSING THE ASSESSEE AS TO WHY THE CLAIM OF THE ASSESSEE SHOULD NOT BE DISALLOWED IT WAS EXPLAINED ON BEHALF OF THE ASSESSEE INTER ALIA THAT IN THE CONTEXT OF TEXTILE AND SPINNING MILLS THE PROCESS OF CONVERTING FIBER TO YARN IS ONE CONTINUES INTERLINKED PROCESS THAT DIFFERENT CATEGORIES OF MACHINES THOUGH INDEPENDENT ARE PART OF THE INTEGRATED SPINNING MILLS AND THEREFORE THE EXPENDITURE INCURR ED ON REPLACEMENT OF ANY OR SOME OF SUCH MACHINES IS AN EXPENDITURE INCURRED TO MAINTAIN PRODUCTION PROCESS WITHOUT BREAK DOWN AND THEREFORE THE ASSESSEE WAS ENTITLED TO CLAIM DEDUCTION OF THE EXPENDITURE TOWARDS REPLACEMENT OF MACHINES AS REVENUE EXPEN DITURE U/S 31(I) OF THE ACT. IT WAS ALSO SUBMITTED THAT ALTERNATIVELY THE EXPENDITURE INCURRED ON PURCHASE OF NEW MACHINERIES AS REPLACEMENT OF OLD ONES QUALIFY FOR DEDUCTION U/S 37 OF THE ACT INASMUCH AS SUCH REPLACEMENT HAS NOT RESULTED IN AUGMENTAT ION OF THE OVER ALL CAPACITY OF THE PLANT. STATING THUS A CATENA OF CASE - LAWS WERE CITED BY THE ASSESSEE IN SUPPORT OF ITS CONTENTIONS. 5. AFTER CAREFULLY CONSIDERING THE EXPLANATIONS AND SUBMISSIONS OF THE ASSESSEE IN THE LIGHT OF THE DECISION OF THE H ONBLE SUPREME COURT IN THE CASE ITA 309/VIZ/2008 SREE SATYANARAYANA SPINNING MILLS TANUKU 4 OF CIT VS. SARVANA SPINNING MILLS PVT. LTD. [2007] (293 ITR 201) AND [2007] (163 TAXMAN 196) THE ASSESSING OFFICER HOWEVER HELD THAT THE EXPENDITURE CLAIMED BY THE APPELLANT FOR PURCHASE OF VARIOUS TYPES OF MACHINERIES A S REPLACEMENT FOR OLD ONES DOES NOT QUALIFY TO BE ALLOWED DEDUCTION AS CURRENT REPAIRS RELATED TO REVENUE EXPENDITURE U/S 31(I) OF THE ACT AND THAT SUCH EXPENDITURE WHICH HAD THE EFFECT OF BESTOWING ENDURING BENEFIT TO THE ASSESSEE PARTOOK OF THE NATURE O F CAPITAL EXPENDITURE AND THEREFORE ONCE AGAIN NOT QUALIFYING FOR DEDUCTION U/S 37 OF THE ACT. OBSERVING THUS THE ASSESSING OFFICER DISALLOWED THE AGGREGATE EXPENDITURE OF RS.3 15 40 294 UNDER THE HEAD REPAIRS TO PLANT AND MACHINERY AND AFTER ALLO WING DEPRECIATION AT THE APPROPRIATE RATE EFFECTED A NET DISALLOWANCE OF RS.2 72 04 268/ - . 6 . THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) AND REITERATED ITS CONTENTIONS. 7 . THE CIT(A) RE - EXAMINED THE ISSUE IN THE LIGHT OF JUDGEMENT OF THE APEX CO URT IN THE CASE OF SARAVANA SPINNING MILLS PVT. LIMITED 293 ITR 201 AND CIT VS. RAMARAJU SURGICAL COTTON MILLS LTD. 294 ITR 228 AND FORMED A VIEW THAT THESE EXPENDITURES ARE NOT OF REVENUE NATURE AND ARE NOT ALLOWABLE U/S 37 OF THE ACT. HE ACCORDINGLY CON FIRMED THE ADDITIONS. 8 . NOW THE ASSESSEE HAS PREFERRED AN APPEAL BEFORE THE TRIBUNAL. BESIDES REITERATING ITS CONTENTIONS THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT WHATEVER EXPENDITURE ARE INCURRED ON THE PLANT AND MACHINERIES IT WAS TO KEEP THE PLANT AND MACHINERY IN RUNNING CONDITIONS AND ALSO THE SAME ARE NECESSARY TO KEEP THE MACHINERY FIT FOR PRODUCTION. OUT OF THESE EXPENDITURE ASSESSEE HAS NOT ACQUIRED ANY INDEPENDENT MACHINERY OR THE UNIT AND MORE SO BY INCURRING THESE EXPENDITURES ASSESSEE HAS NOT ACQUIRED ANY ENDURING BENEFIT. THEREFORE THE ENTIRE EXPENDITURE IS TO BE ALLOWED AS A REVENUE EXPENDITURE. HE PLACED A RELIANCE UPON THE JUDGEMENT OF THE DELHI HIGH COURT IN THE CASE OF INSTALLMENT SUPPLY PVT. LTD. VS. CIT 149 ITR 52 (H IGH COURT DELHI) AND ALSO THE JUDGEMENTS OF THE APEX COURT IN THE CASE OF CIT VS. SARAVANA SPINNING MILLS LTD. 293 ITR 201; CIT VS. ITA 309/VIZ/2008 SREE SATYANARAYANA SPINNING MILLS TANUKU 5 RAMARAJU SURGICAL COTTON MILLS LTD. 294 ITR 201; CIT VS. MANGAYARKARASI MILLS PVT. LTD. 315 ITR 114; CIT VS. HINDUSTAN TE XTILES LTD. 2009 - TIOL - 138 - SC - IT - LB DATED 3.11.2009; CIT VS. SUGAVANEESWARA SPINNING MILLS LTD. 209 - TIOL - 124 - SC - IT - LB DATED 16.11.2009; CIT VS. BHOJRAJ TEXTILE MILLS LTD. 2009 - TIOL - 22 - SC - IT - LB DATED 8.2.2010. 9. THE LD. D.R. ON THE OTHER HAND HAS SUBMITT ED THAT WHILE EXAMINING THE NATURE OF EXPENDITURE INCURRED ON REPAIR/MAINTENANCE OF THE PLANT AND MACHINERY ONE HAS TO EXAMINE WHETHER BY INCURRING THOSE EXPENDITURE THE ASSESSEE ACQUIRES ANY ENDURING BENEFIT OUT OF IT. THE LD. D.R. PLACED A RELIANCE UPO N THE JUDGEMENT OF THE APEX COURT IN THE CASE OF SARAVANA SPINNING MILLS LTD. (SUPRA) WITH THE SUBMISSIONS THAT THE REPLACEMENT OF A PART OF A MACHINERY CANNOT BE CONSIDERED TO BE A REVENUE EXPENDITURE. BESIDES HE HAS ALSO PLACED A HEAVY RELIANCE UPON TH E ORDER OF THE CIT(A). 10. HAVING HEARD THE RIVAL SUBMISSIONS AND FROM A CAREFUL PERUSAL OF THE ORDERS OF THE AUTHORITIES BELOW AND THE JUDGEMENTS REFERRED TO WE ARE OF THE VIEW THAT NO STRAIGHT JACKET FORMULA HAS BEEN LAID DOWN BY THE APEX COURT TO DETE RMINE THE NATURE OF EXPENDITURE WH ETHER IT IS A REVENUE OR CAPITAL. THE NATURE OF EXPENDITURE WHETHER IT IS REVENUE OR CAPITAL IN NATURE WAS EXAMINED BY THE APEX COURT IN VARIOUS JUDGEMENTS. BEFORE DWELLING UPON THE ISSUE INVOLVED WE WOULD LIKE TO EXAMI NE THE LEGAL PROPOSITIONS LAID DOWN BY THE APEX COURT IN THIS REGARD. 11. IN THE CASE OF CIT VS. SARAVANA SPINNING MILLS LTD. (SUPRA) THE APEX COURT HAS EXAMINED THE NATURE OF EXPENDITURES AND IN THAT CASE THE ISSUE BEFORE THEIR LORDSHIP WAS WHETHER THE EXPENDITURES INCURRED BY THE ASSESSEE FOR MODERNIZATION AND REPLACEMENT COME WITHIN THE CONNOTATION OF THE WORDS CURRENT REPAIRS ENVISAGED IN SECTION 31(I) OF THE ACT? IN THE ENTIRE JUDGEMENT THEIR LORDSHIP HAVE DEALT WITH THE ISSUE OF CURRENT REPAIRS AND THEY REFRAINED THEMSELVES FROM EXPRESSING THEIR VIEWS WITH REGARD TO THE ALLOWABILITY OF A CLAIM OF EXPENDITURE U/S 37(1) OF THE ACT. WITH RESPECT TO THE CURRENT REPAIRS THEIR LORDSHIP HAVE HELD THAT THE MANUFACTURING PROCESS IN THE TEXTILE MILL WA S NOT ONE CONTINUOUS INTEGRATED PROCESS; (I) THAT TO ITA 309/VIZ/2008 SREE SATYANARAYANA SPINNING MILLS TANUKU 6 DECIDE THE APPLICABILITY OF SECTION 31(I) THE TEST WAS NOT WHETHER THE EXPENDITURE WAS REVENUE OR CAPITAL IN NATURE BUT WHETHER THE EXPENDITURE WAS CURRENT REPAIRS. THE BASIC TEST WAS TO FIND OUT WHE THER EXPENDITURE WAS INCURRED TO PRESERVE AND MAINTAIN AN ALREADY EXISTING ASSET AND THE EXPENDITURE MUST NOT BE TO BRING A NEW ASSET INTO EXISTENCE OR TO NEW ADVANTAGE. THEIR LORDSHIP FURTHER HELD THAT EACH MACHINE INCLUDING THE RING FRAME WAS AN INDEP ENDENT AND SEPARATE MACHINE CAPABLE OF INDEPENDENT AND SPECIFIC FUNCTION AND THEREFORE THE EXPENDITURE INCURRED FOR REPLACEMENT THEIR - OF WOULD NOT COME WITHIN THE MEANING OF CURRENT REPAIRS. THE REPLACEMENT OF RING FRAME CONSTITUTED SUBSTITUTION OF AN OLD ASSET BY A NEW ASSET AND THEREFORE THE EXPENDITURE INCURRED BY THE ASSESSEE DID NOT FALL WITHIN THE MEANING OF CURRENT REPAIRS IN SECTION 31(I). UNDER SECTION 31(I) THE DEDUCTION ADMISSIBLE IS ONLY FOR CURRENT REPAIRS. THEREFORE THE QUESTION A S TO WHETHER THE EXPENDITURE INCURRED BY THE ASSESSEE CONCEPTUALLY IS REVENUE OR CAPITAL IN NATURE IS NOT RELEVANT TO DECIDE THE QUESTION WHETHER SUCH EXPENDITURE COMES WITHIN THE ETYMOLOGICAL MEANING OF THE EXPRESSION CURRENT REPAIRS. IN OTHER WORDS E VEN IF THE EXPENDITURE IS REVENUE IN NATURE IT MAY NOT FALL IN THE CONNOTATION OF CURRENT REPAIRS. THEIR LORDSHIP ACCORDINGLY CONFIRMED THE VIEW TAKEN BY THE ASSESSING OFFICER THAT EACH MACHINE INCLUDING THE RING FRAME WAS AN INDEPENDENT AND SEPARATE M ACHINE CAPABLE OF INDEPENDENT AND SPECIFIC FUNCTIONS. THEREFORE THE EXPENDITURE INCURRED FOR REPLACEMENT OF THE NEW MACHINES WOULD NOT COME WITHIN THE MEANING OF THE WORD CURRENT REPAIRS. THE JUDGEMENT WAS RENDERED BY THE APEX COURT ON AUGUST 10 2007 . 12. THERE AFTER IN ANOTHER CASE OF CIT VS. RAMARAJU SURGICAL COTTON MILLS LTD. (SUPRA) THEIR LORDSHIP OF THE APEX COURT HAD OCCASION TO EXAMINE THE CLAIM OF DEDUCTION OF THE EXPENDITURE INCURRED ON PLANT AND MACHINERY U/S 37 OF THE I.T. ACT. THAT C ASE WAS RESTORED BACK TO THE CIT(A) BECAUSE THE COMPLETE DETAILS REGARDING THE PRODUCTION CAPACITY REMAINING CONSTANT EVEN AFTER REPLACEMENT WAS NOT AVAILABLE. THEIR LORDSHIP HAVE NOT EXPRESSED THEIR OPINION ON THE ARGUMENTS OF THE LD. COUNSEL FOR THE DEP ARTMENT THAT THE ASSESSEE WAS NOT ENTITLED TO CLAIM REPLACEMENT EXPENDITURE AS REVENUE EXPENDITURE AS IT WAS NOT INCURRED TO REPLACE AN OLD WORN OUT ITEM OF ITA 309/VIZ/2008 SREE SATYANARAYANA SPINNING MILLS TANUKU 7 MACHINERY THAT ON THE CONTRARY THE OLD MACHINE HAS BEEN REPLACED BY A NEW MACHINE WHICH CONSTITU TES OF AN ADVANTAGE OF AN ENDURING NATURE AND THE EXPENDITURE WAS CAPITAL IN NATURE. 13. AGAIN IN THE CASE OF CIT VS. SH. MANGAYARKARSI MILLS PVT. LTD. (SUPRA) THE APEX COURT HAS DEALT WITH THE CLAIM OF THE ASSESSEE U/S 37 OF THE ACT AND THEY HAVE REFORMU LATED THE QUESTION POSED BEFORE THEM. THE FORMULATED QUESTION IS AS UNDER: WHETHER EXPENDITURE INCURRED ON REPLACEMENT OF MACHINERY IN THE FACT AND CIRCUMSTANCES OF THIS CASE AMOUNTS TO A REVENUE EXPENDITURE DEDUCTIBLE U/S 37 OF THE ACT OR CURRENT REP AIRS DEDUCTIBLE U/S 31 OF THE ACT? THE RESPONDENT IN THIS CASE HAS RAISED A LIMITED CLAIM THAT THE EXPENDITURE INCURRED IS OF REVENUE IN NATURE. THEIR LORDSHIP HAS ALSO OBSERVED THAT THE RESPONDENT ONLY STATED THAT ITS CLAIM WAS LIMITED TO THE EXPEND ITURE BEING OF REVENUE NATURE AND THUS ALLOWABLE U/S 37 OF THE ACT. NOWHERE HAD THE RESPONDENT CLAIMED THAT THE SAID EXPENDITURE AMOUNTED TO CURRENT REPAIRS U/S 31 OF THE ACT. THEREFORE ACCORDING TO THE RESPONDENT THERE IS NO ISSUE REGARDING THE EXPE NDITURE AMOUNTING TO CURRENT REPAIRS U/S 31 OF THE ACT. BUT THIS SUBMISSION OF THE RESPONDENT WAS NOT ACCEPTED BY THE APEX COURT AND THEIR LORDSHIP HAVE OBSERVED THAT APPELLANT HAS CONTENDED BEFORE THE COURTS BELOW THAT EACH OF THE ITEM OF MACHINERY IN A SPINNING MILL IS INDEPENDENT. THE APEX COURT HAS GIVEN A SPECIFIC FINDING WITH REGARD TO THE ISSUE WHETHER EACH MACHINE IN A TEXTILE MILL IS AN INDEPENDENT ITEM OR MERELY A PART OF A COMPLETE SPINNING MILL BY HOLDING THAT THE RING FRAME IN TEXTILE MILL I S AN INDEPENDENT AND SEPARATE MACHINE AND IS ALSO A PART OF INTEGRATED PROCESS OF MANUFACTURE OF YARN INTEGRALLY CONNECTED TO OTHER MACHINES IN THE MILL FOR PRODUCTION OF THE FINAL PRODUCT. HOWEVER THIS INTERCONNECTION DOES NOT TAKE AWAY THE INDEPENDENT IDENTITY AND DISTINGUISHED FUNCTION OF EACH MACHINE. THUS EACH MACHINE IN TEXTILE MILL SHOULD BE TREATED INDEPENDENTLY. THEIR LORDSHIP FURTHER OBSERVED THAT REPLACEMENT OF SUCH AN OLD MACHINE WITH A NEW ONE WOULD CONSTITUTE THE BRINGING INTO EXISTENCE O F A NEW ASSET IN PLACE OF THE OLD ONE AND NOT REPAIR OF THE OLD ONE AND EXISTING MACHINE AND ALSO A NEW ASSET IN A TEXTILE MILL IS NOT ONLY FOR A TEMPORARY USE RATHER IT GIVES THE PREDECESSOR AN ENDURING ITA 309/VIZ/2008 SREE SATYANARAYANA SPINNING MILLS TANUKU 8 BENEFIT OF BETTER AND MORE EFFICIENT PRODUCTION OV ER A PERIOD OF TIME. RELYING UPON THE JUDGEMENT IN THE CASE OF SARAVANA MILLS REPORTED AT 293 ITR 201 (2) 224 ITR 414 (SC) (1967) (3) 66 ITR 710 (SC) THEIR LORDSHIP OBSERVED THAT SARAVANA MILLS CASE (1) HOLDS THAT EXPENDITURE IS DEDUCTIBLE U/S 37 ONLY IF IT: (A) IS NOT DEDUCTIBLE U/S 30 TO 36 (B) IS OF A REVENUE NATURE (C) IS INCURRED DURING THE CURRENT ACCOUNTING YEAR AND (D) IS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THEY FURTHER PLACED A RELIANCE UPON THE JUDGEMENT OF THE APEX COU RT IN THE CASE OF TRAVANCORE COCHIN CHEMICALS LIMITED VS. CIT 2 SCC 20 AND OBSERVED THAT THE EXPENDITURE IS OF CAPITAL NATURE WHEN IT AMOUNTS TO AN ENDURING ADVANTAGE FOR THE BUSINESS AND REPAIR IS DIFFERENT FROM BRINGING IN NEW ASSET FOR THE BUSINESS. FU RTHER PLACING A RELIANCE UPON THE JUDGEMENT OF THE APEX COURT IN THE CASE OF LAKSHMIJI SUGAR MILLS PVT. LTD. VS. CIT AIR 1972 SC 159 THEIR LORDSHIP FURTHER HELD THAT THE EXPENDITURE INCURRED FOR BRINGING INTO EXISTENCE NEW ASSET OR AN ENDURING BENEFIT FOR THE ASSESSEE AMOUNTS TO BE A CAPITAL EXPENDITURE. THEIR LORDSHIP THEREFORE HELD THAT A REPLACEMENT OF THE MACHINERY AMOUNTS TO BRINGING INTO EXISTENCE A NEW ASSET AND ALSO AN ENDURING BENEFIT FOR THE ASSESSEE. THEY ACCORDINGLY HELD THE EXPENDITURE TO BE OF CAPITAL NATURE AND NOT ALLOWABLE U/S 37 OF THE ACT. THEIR LORDSHIP FURTHER OBSERVED IN THIS CASE THAT ACCOUNTING PRACTICES MAY NOT BE THE BEST GUIDE IN DETERMINING THE NATURE OF EXPENDITURE IN THIS CASE THEY ARE INDICATIVE OF WHAT THE ASSESSEE ITSELF T HOUGHT OF THE EXPENDITURE IT MADE ON REPLACEMENT OF MACHINERY AND THAT THE CLAIM FOR DEDUCTION UNDER THE ACT WAS MADE MERELY TO DIMINISH THE TAX BURDEN AND NOT UNDER THE BELIEF THAT IT WAS ACTUALLY REVENUE EXPENDITURE. QUOTING VARIOUS EXAMPLES AND PLACIN G RELIANCE UPON VARIOUS JUDGEMENTS OF THE APEX COURT THEIR LORDSHIP OF THE APEX COURT HAVE MADE IT CLEAR THAT WHERE EXPENDITURE ARE INCURRED TO REPLACE AN INDEPENDENT UNIT OR A PART OF THE MACHINERY WHICH CONSTITUTES TO BE AN INDEPENDENT MACHINE RESULTING INTO AN ENDURING BENEFIT IS A CAPITAL EXPENDITURE AND WOULD NOT BE ALLOWABLE AS A REVENUE EXPENDITURE. 14. IN THE CASE OF CIT VS. HINDUSTAN TEXTILES LTD IN WHICH JUDGEMENT WAS RENDERED BY THE APEX COURT ON NOVEMBER 3 2009 A SIMILAR ISSUE WAS RAISED WH ETHER THE ASSESSEES CLAIM OF DEDUCTION FOR EXPENDITURE ON REPLACEMENT OF ITA 309/VIZ/2008 SREE SATYANARAYANA SPINNING MILLS TANUKU 9 AN ASSET IS ALLOWABLE U/S 37 OF THE ACT. THEIR LORDSHIP APEX COURT HAVE REMITTED THE MATTER BACK TO THE HIGH COURT FOR DE NOVO CONSIDERATION IN THE LIGHT OF JUDGEMENT IN THE CASE OF MANGAYARKARSI MILLS PVT. LTD. (SUPRA) AND ALSO TO EXAMINE THE CASE IN VIEW OF TEST LAID DOWN BY THIS COURT IN THE CASE OF CIT VS. SARAVANA SPINNING MILLS PVT. LTD. (SUPRA) AND ALSO CIT VS. THE RAMARAJU SURGICAL COTTON MILLS (SUPRA). A SIMILAR FINDING WAS AGAIN GIVEN BY THE APEX COURT IN THE CASE OF CIT VS. M/S. SUGAVANEESWARA SPINNING MILLS LTD. (SUPRA) WHILE RENDERING JUDGEMENT ON NOVEMBER 16 2009. AGAIN IN THE CASE OF CIT VS. BHOJRAJ TEXTILE MILLS LTD. (SUPRA) THE LARGER BENCH OF THE APEX COURT WHIL E RENDERING JUDGEMENT ON 8 TH FEBRUARY 2010 AGAIN REMITTED THE MATTER BACK TO THE LOWER AUTHORITIES WITH THE SAME OBSERVATIONS TO RE - EXAMINE THE ISSUE IN THE LIGHT OF SARAVANA SPINNING MILLS LTD. (SUPRA) AND RAMARAJU SURGICAL COTTON MILLS LTD. (SUPRA) NOT ONLY THAT THE HIGH COURT OF MADRAS IN THE CASE OF SUPER SPINNING MILLS VS. ACIT 323 ITR 449 HAS ALSO REMITTED THE MATTER BACK TO THE CIT(A) TO RECONSIDER THE ISSUE IN THE LIGHT OF DIRECTIONS GIVEN BY THE SUPREME COURT IN THE CASE OF SARAVANA SPINNING MIL LS LTD (SUPRA) AND RAMARAJU SURGICAL COTTON MILLS LTD. (SUPRA) AND MANGAYARKARSI MILLS PVT. LTD. (SUPRA). FOLLOWING THESE JUDGEMENTS OF THE APEX COURT AND THE MADRAS HIGH COURT THE TRIBUNAL HAS ALSO RESTORED THE MATTER BACK TO THE ASSESSING OFFICER FOR RE - ADJUDICATION OF THE ISSUE IN THE LIGHT OF AFORESAID JUDGEMENTS OF THE APEX COURT IN THE CASE OF LAMBODHARA TEXTILES LTD. VS. ACIT IN ITA NO.288/MADRAS/2010. A RELIANCE WAS ALSO PLACED UPON THE JUDGEMENTS OF THE OTHER HIGH COURTS IN THE CASE OF NATHMAL BANKATLAL PARIKH & CO. VS. CIT 122 ITR 168 (AP); NEW SHORROCK SPINNING & MFG. CO. LTD. VS. CIT 30 ITR 338; CIT VS. CHOWGULE & CO. (P) LTD. 214 ITR 523; CIT VS. UDAIPUR DISTELLERY CO. LTD. 268 ITR 451 AND CIT VS. BHARAT ALUMINIUM LTD 292 ITR 600 (DEL). R ELIANCE WAS ALSO PLACED ON THE JUDGEMENT OF THE APEX COURT IN THE CASE OF CIT VS. KALYANJI MAVJI & CO. 122 ITR 49 (SC). 15. WE HAVE CAREFULLY EXAMINED THE ABOVE REFERRED JUDGEMENTS AND WE FIND THAT THEY HAVE BEEN RENDERED UNDER DIFFERENT SET OF FACTS. ITA 309/VIZ/2008 SREE SATYANARAYANA SPINNING MILLS TANUKU 10 16. IN THOSE JUDGEMENTS A STRAIGHT JACKET FORMULA HAS NOT BEEN LAID DOWN BY APEX COURT OR HIGH COURT. CERTAIN GUIDELINES OR TEST HAVE BEEN LAID DOWN IN ORDER TO DETERMINE THE NATURE OF EXPENDITURE INCURRED BY THE ASSESSEE. ACCORDING TO US THE EXPENDITUR E INCURRED IN REPAIR OR MAINTENANCE OF MACHINERY BY REPLACING ITS PART WHICH DOES NOT CONSTITUTE TO BE AN INDEPENDENT MACHINE SHALL BE THE REVENUE EXPENDITURE AND IS ALLOWABLE FOR DEDUCTION EITHER AS CURRENT REPAIRS OR U/S 37(I) OF THE ACT. IF THE EXPE NDITURE ARE INCURRED IN REPLACEMENT OF THE MACHINE UNIT OR ANY OF ITS PART WHICH CONSTITUTES A MACHINE IN ITSELF CAUSING ENDURING BENEFIT TO THE ASSESSEE IS A CAPITAL EXPENDITURE. THE ABOVE OBSERVATIONS ARE ONLY SUGGESTIVE AND NOT THE CONCLUSIVE. 17 . TURNING TO THE FACTS OF THE CASE THOUGH THE REVENUE HAS EXAMINED THE NATURE OF EXPENDITURE BUT THE EXPENDITURES WERE NOT MINUTELY EXAMINED BY THE ASSESSING OFFICER IN THE LIGHT OF GUIDELINES OR TEST LAID DOWN BY THE APEX COURT IN THE AFORESAID CASES. THEREFORE THE ISSUE REQUIRES A FRESH ADJUDICATION IN THE LIGHT OF AFORESAID JUDGEMENTS OF THE APEX COURT. WE ACCORDINGLY SET ASIDE THE ORDER OF THE CIT(A) AND RESTORE THE MATTER TO THE FILE OF THE A.O. WITH A DIRECTION TO RE - ADJUDICATE THE ISSUE AFRESH IN THE LIGHT OF RATIO LAID DOWN BY THE APEX COURT IN THE CASE OF SARAVANA SPINNING MILLS LTD (SUPRA) MANGAYARKARSI MILLS (P) LTD. (SUPRA) AND THE RAMARAJU SURGICAL COTTON MILLS LTD. (SUPRA). 18. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 21.1 .20 1 1 SD/ - SD/ - (BR BASKARAN) (SUNIL KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER VG/SPS VISAKHAPATNAM DATED 21 ST JANUARY 20 1 1 ITA 309/VIZ/2008 SREE SATYANARAYANA SPINNING MILLS TANUKU 11 COPY TO 1 SREE SATYANARAYANA SPINNING MILLS LIMITED 9 - 13 SRINIVASA TALKIES ROAD VENKATARAYAPURAM TANUKU WEST GODAVARI DISTRICT 2 ADDL. CIT RAJAHMUNDRY RANGE RAJAHMUNDRY 3 THE CI T RAJAHMUNDRY 4 THE CIT (A) RAJAHMUNDRY 5 THE DR ITAT VISAKHAPATNAM . 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM