IN SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO.2984 OF 2007 Commissioner of Income Tax, Gujarat Appellant VS. Sarangpur Cotton Mfg.Company Ltd. Respondent ORDER present appeal has been filed against judgment and order dated 3rd July, 2002 passed by High Court of Gujarat at Ahmedabad in Income Tax Reference No.141 of 1989. following question of law has been raised in appeal: Whether High Court was right in law in holding that Assessee was entitled to deduction on account of revenue expenditure incurred on machineries replaced for value of Rs.26,84,235/- Briefly stated facts, which give rise to this appeal, are as follows: respondent-assessee is public limited company and is engaged in business of manufacturing cotton yarns and textile. During Assessment year 1974-1975, Signature Not Verified Digitally signed by ANITA MALHOTRA respondent-assessee has claimed deduction of Date: 2017.04.01 12:15:42 IST Reason: Rs.35,49,011/- as repairs and replacement of machinery 1 expenditure on conversion material etc. assessing authority disallowed sum of Rs.27,71,270/- out of aforesaid revenue expenditure claimed by respondent on ground that it related to installation of above machinery and is in nature of outlay of capital expenditure. Feeling aggrieved,the respondent-assessee preferred appeal before Commissioner of Income Tax Appeals. Commissioner of Income Tax Appeals vide order dated 29th September, 1983 allowed Rs.26,84,235/- as admissible revenue expenditure and at same time directed assessing officer to withdraw depreciation and development rebate granted on these capitalized items, as they have been treated as revenue expenditure. Revenue preferred appeal before Income Tax Appellate Tribunal. Income Tax Appellate Tribunal vide order dated 12th September, 1985 agreed with order passed by Commissioner of Income Tax Appeals and dismissed appeal. Still feeling aggrieved, Revenue department preferred Refernece Application before Gujarat High Court. High Court by impugned order had answered question of law raised by appellant herein in favour of respondent-assessee. 2 We have heard Ms. Pinky Anand, learned Additional Solicitor General appearing on behalf of appellant-revenue department. No one has entered appearance on behalf of respondent-assessee. Learned Additional Solicitor General submitted that view taken by Gujarat High Court by relying on two decisions in case of CIT vs. Baroda Industrial Development Corporation Ltd. (1992) 198 ITR 716 and in case of CIT vs. Satyadev Chemical Ltd.(1997) 226 ITR 95 has been impliedly overruled by this Court in case of Commissioner of Income Tax, Madurai v. Sarvana Spining Mills(P) Ltd. (2007) 7 SCC 298. She submitted that each items for which deduction under head current repairs was sought is machine by itself and therefore deduction under Section 31(i) cannot be allowed. She invited our attention to paragraphs 9, 10, 12, 13 and 14 of judgment in case of Sarvana Spinning Mills (P) Ltd. supra and submitted that if current repairs relate to independent machines itself instead of repair of part of that machine, deduction cannot be granted under Section 31(i) of Income Tax Act, 1961. In Sarvana Spinning Mills (P) Ltd. supra this Court has held that in textile mill there are several departments/divisions. In each department/division there are several machines and perform different functions. Therefore, when each of Department/Division perform different functions, repair/substitution of old 3 machine will not come within definition of word current repairs and deduction cannot be claimed thereunder. In this view of matter, we are of considered opinion that impugned judgment and order passed by Gujarat High Court as also orders passed by Income Tax Appellate Tribunal and Commissioner of Income Tax Appeals on this issue cannot be sustained and are thereby set aside. It is held that respondent is not entitled for any deduction under head current repairs as claimed and allowed by two authorities. appeal succeeds and is allowed. There shall be no order as to costs. Pending application, if any, also stands disposed of. J. [R.K. AGRAWAL] J. [MOHAN M.SHANTANAGOUDAR] New Delhi; March 28, 2017. 4 ITEM NO.108 COURT NO.10 SECTION IIIA SUPREME COURT OF INDIA RECORD OF PROCEEDINGS Civil Appeal No(s). 2984/2007 COMMNR. OF INCOME TAX, GUJARAT Appellant(s) VERSUS SARANGPUR COTTON MFG. CO. LTD. Respondent(s) (With appln. (s) for amendment of cause title and interim relief and office report) Date : 28/03/2017 This appeal was called on for hearing today. CORAM : HON'BLE MR. JUSTICE R.K. AGRAWAL HON'BLE MR. JUSTICE MOHAN M. SHANTANAGOUDAR For Appellant(s) Ms. Pinky Anand,ASG Mr. K.Radhakrishnan,Sr.Adv. Mr. Arijit Prasad,Adv. Ms. Gargi Khanna,Adv. Mr. Rajesh Ranjan,Adv. Mr. Shashank Dewan,Adv. Mr. Saudamini Sharma,Adv. For Mrs. Anil Katiyar,Adv. For Respondent(s) UPON hearing counsel Court made following ORDER appeal is dismissed in terms of signed order. Pending application is also disposed of. (Anita Malhotra) (Chander Bala) Court Master Court Master (Signed order is placed on file.) 5 Commissioner of Income-tax, Gujarat v. Sarangpur Cotton Mfg. Company Ltd