IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE P.S.GOPINATHAN WEDNESDAY, THE 23RD JUNE 2010 / 2ND ASHADHA 1932 ITA.No. 145 of 2001() --------------------- ITA.362/COCH/1995 of I.T.A.TRIBUNAL,COCHIN BENCH .................... APPELLANT/APPELLANT ---------------------------------- THE COMMISSIONER OF INCOME TAX, TRICHUR. BY ADV. SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES) SRI.GEORGE K. GEORGE, SC FOR IT RESPONDENT/RESPONDENT: --------------------------------------- M/s. VANAJA TEXTILES Ltd., KURICHIKKARA, TRICHUR. ADV. SRI.P.BALAKRISHNAN (E) FOR R1 THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 23/06/2010, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: C.N.RAMACHANDRAN NAIR & P.S.GOPINATHAN, JJ. --------------------------- I.T.A No. 145 OF 2001 -------------------------- Dated this the 23rd day of June, 2010 J U D G M E N T Ramachandran Nair, J. The question raised in the appeal filed by the revenue is whether the Tribunal was justified in allowing the deduction of the expenditure incurred by the assessee for purchase of Autoconer 238 in the place of Conewinder. The case of the assessee is that it is only replacement of old machinery which entitle them to claim the expenditure as revenue and the same was rightly allowed by the Tribunal. The learned sanding counsel for the revenue relied on the decision of the Supreme Court reported in Commissioner of Income Tax v. Sri. Mangayarkarasi Mills P. Ltd [(2009) 315 ITR 114 (SC)] wherein the Supreme Court has held that replacement of machinery in the spinning mill is not revenue expenditure. The learned counsel for the assessee on the other hand relied on the decision of the Supreme Court in Commissioner of Income Tax v. McDowell and Co.Ltd [(2009) 314 ITR 177 (SC)]. We notice from the Tribunal's order that they have relied on their another order in Bhagavathi Textile's case, which was also subject matter of the appeal before this Court. However, since that Company is ITA No.145/01 2 insolvent, this Court felt that there was no necessity to decide the case on merits. In the above circumstances and since the decision of the Supreme Court referred above were not before the assessing officer while deciding the issue, we allow the appeal by setting aside the order of the Tribunal and remand the matter back to the assessing officer to decide the issue afresh in the light of the facts and the decisions of the Supreme Court referred above or any other relevant decision of this Court, after giving an opportunity to the assessee but without being influenced by the Tribunal's order in Bhagavathi Textile's case. Both the parties are free to rely on any other decisions of the Supreme Court or of this Court. The assessing officer shall revise the assessment within a period of three months from the date of receipt of a copy of this judgment. C.N.RAMACHANDRAN NAIR (JUDGE ) P.S.GOPINATHAN (JUDGE ) vps ITA No.145/01 3 ITA No.145/01 4