IN HIGH COURT OF JUDICATURE AT MADRAS DATED:17.12.2019 CORAM HON'BLE DR.JUSTICE VINEET KOTHARI AND HON'BLE MR.JUSTICE R.SURESH KUMAR Tax Case Appeal Nos.282 & 283 of 2009 Commissioner of Income Tax Salem. ... Appellant in both TCAs Vs. M/s.The Jawahar Mills Ltd., No.4, Nehru Nagaram Salem 636 005. ... Respondent in both TCAs Tax Case Appeals filed under Section 260A of Income Tax Act, 1961 against order of Income Tax Appellate Tribunal 'D' Bench dated 04.02.2005 in ITA No.1334/Mds/99 and ITA No.1335/Mds/99 for Assessment Years 1993-94 and 1994-95 respectively. For Appellant : Mr.M.Swaminathan Senior Standing Counsel Assisted by V.Pushpa Junior Standing Counsel For Respondent : Notice served No appearance http://www.judis.nic.in Judgment dated 17.12.2019 in T.C.(A).Nos.282 & 283/2009 [Commissioner of Income Tax V. M/s.The Jawahar Mills Limited] 2/8 COMMON JUDGMENT (Judgment of Court was delivered by DR.VINEET KOTHARI,J.) Revenue has filed these appeals under Section 260A of Income Tax Act, 1961 by raising substantial question of law arising from order in ITA No.1334/Mds/99 and ITA No.1335/Mds/99 respectively on 04.02.2005 for Assessment Years 1993-94 and 1994- 95. 2.The Tribunal by its impugned order allowed cost of replacement of machineries like Motor Rollers, Spindles, Gears etc. in Textile Mill of Assessee with following observations: "9.I.T.A.Nos.1334 & 1335/Mds/99: These two appeals are filed by Revenue against order of CIT (Appeals) and relate to assessment years 1993-94 and 1994-95. solitary issue raised in these appeals relates to question as to whether cost of replacement of machinery could be claimed as revenue expenditure. replaced machineries are assemble of Motor Rollers, Spindles, gears etc. Assessing Officer observed that machineries under consideration are indigenous products made in India and are nothing but modernized system of automatic controllers installed to replace manual labour. He, therefore, disallowed claim of assessee. CIT (Appeals), however, allowed claim of assessee. We find that jurisdictional High Court in case of CIT v. Salem Co-operative Spinning Mills Ltd. (148 ITR 176) (Mad) has held that expenditure on replacement of conventional card clothing by metallie card clothing is revenue expenditure and as such exigible to deduction under Section 37. We do not find any http://www.judis.nic.in Judgment dated 17.12.2019 in T.C.(A).Nos.282 & 283/2009 [Commissioner of Income Tax V. M/s.The Jawahar Mills Limited] 3/8 infirmity in order of CIT (Appeals). Accordingly, order of CIT (Appals) is upheld. 10.In result, Revenue's appeal's are dismissed." 3.The present appeals were admitted by Coordinate Bench of this Court on 30.04.2009 on following substantial question of law: "Whether on facts and in circumstances of case, Income Tax Appellate Tribunal was right in holding that expenditure on replacement of old machinery by purchase and installation of machinery was allowable as revenue expenditure?" 4.The learned Senior Standing Counsel for Revenue submitted that controversies now settled by Hon'ble Supreme Court in case of Commissioner of Income Tax, Gujarat Vs. Sarangpur Cotton Mfg. Co. Ltd., [2017] 80 taxmann.com 260 (SC), in which, Hon'ble Supreme Court has held as under: "8.Learned Additional Solicitor General submitted that view taken by Gujarat High Court by relying on two decisions in case of CIT v. Baroda Industrial Development Corpn. Ltd. [1992] 198 ITR 716/65 Taxman 359 (Guj.) and in case of CIT v. Satyadev Chemical Ltd. [1997] 226 ITR 95 (Guj.) has been impliedly overruled by this Court in case of CIT v. Sraavana Spg. Mills (P.) Ltd. [2007] 293 ITR 201/63 Taxman 201 (SC). 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 out attention to paragraphs 9, 10, 12, 13 and 14 of hte judgment in case of Saravana Spg. Mills (P.) Ltd. (supra) and submitted that if current repairs related to independent machines itself http://www.judis.nic.in Judgment dated 17.12.2019 in T.C.(A).Nos.282 & 283/2009 [Commissioner of Income Tax V. M/s.The Jawahar Mills Limited] 4/8 instead of repairs of part of that machine, deduction cannot be granted under Section 31(i) of Income Tax Act, 1961. In Saravana Spg. Mills (P) Ltd. (supra) this Court has held that in textile mill there are several department/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 machine will not come within definition of word "current repairs" and deduction cannot be claimed thereunder. 9.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." 5.None has appeared on behalf of respondent/Assessee despite service. 6.The replacement of machineries in present case which came up for consideration by Assessing Authority as per details of Replacement of Machinery submitted by Assessee himself, which form part of Assessment Order are quoted below for ready reference. "THE JAWAHAR MILLS LIMITED, SALEM - 5 Assessment Year 1993-94 Y.E. 31.3.93 Details of Replacement of Machinery http://www.judis.nic.in Judgment dated 17.12.2019 in T.C.(A).Nos.282 & 283/2009 [Commissioner of Income Tax V. M/s.The Jawahar Mills Limited] 5/8 Sl. Name of Name of Invoice Invoice Lorry Erection Total Date of No. Supplier Machinery No. & Date Amount- Freigh Charges Value Comme Rs. t Rs. ncement 1 Texmaco Ltd., 2 Nos TMC/MS/3 26,20,696 37,325 19,860 26,77,881 14.09.92 Calcutta Texmaco 24/92-93 Howa CM dt. 30.07.92 80 Model Card Nos.1322 & 1327 2 Texmaco Ltd., 1 No TMC/MS/4 13,451,136 24,850 12,675 13,82,661 28.09.92 Calcutta Texmaco 13/92-93 Howa Card dt. 30.08.92 CM 80 Card No.1326 3 Texmaco Ltd., 1 No TMC/MS/ 13,56,732 23,050 18,825 13,98,607 22.01.93 Calcutta Texmaco 680/92-93 Howa Card dt. 17.12.92 CM 80 Card No.1336 Total : 54,59,149 7.The total replacement cost of three machineries in question purchased by Assessee amounting to Rs.54,59,149/- came to be allowed by Tribunal as 'repairs maintenance expenditure' or 'revenue expenditure'. said findings of learned Tribunal are clearly contrary to decision of Hon'ble Supreme Court (cited supra) and therefore, view of Tribunal cannot be sustained and replacement of machineries as whole by Assessee cannot be held to be current repairs or allowable revenue expenditure. 8.Therefore, respectfully following binding precedent of Hon'ble Supreme Court in case of Commissioner of Income Tax, http://www.judis.nic.in Judgment dated 17.12.2019 in T.C.(A).Nos.282 & 283/2009 [Commissioner of Income Tax V. M/s.The Jawahar Mills Limited] 6/8 Gujarat V. Sarangpur Cotton Mfg. Co. Ltd., present Appeals filed by Revenue deserves to be allowed and substantial question of law framed is answered in favour of Revenue and against Assessee, we accordingly do so. Appeals are accordingly allowed. No order as to costs. (V.K.J.) (R.S.K.J.) 17.12.2019 Index : Yes/No Speaking Order : Yes/No Sgl Note: Copy of this order may be sent to respondent/Assessee. To Income Tax Appellate Tribunal, Chennai 'D' Bench, Chennai http://www.judis.nic.in Judgment dated 17.12.2019 in T.C.(A).Nos.282 & 283/2009 [Commissioner of Income Tax V. M/s.The Jawahar Mills Limited] 7/8 DR.VINEET KOTHARI, J. And R.SURESH KUMAR, J. Sgl T.C.A.Nos.282 & 283 of 2009 17.12.2019 Commissioner of Income-tax, Salem v. Jawahar Mills Ltd