IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 23.04.2009 CORAM: THE HONOURABLE MR.JUSTICE K.RAVIRAJA PANDIAN AND THE HONOURABLE MR.JUSTICE M.M.SUNDRESH Tax Case(Appeal) No.409 of 2008 The Commissioner of Income Tax Madurai .. Appellant -vs- M/s Sitalakshmi Mills Limited Mill Premises, Tirunagar Madurai 625 006. .. Respondent TAX CASE filed under Section 260 A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal, MADRAS 'D' Bench, Chennai dated 19.02.2007 passed in ITA.No.994/Mds/2000 against the order of the Commissioner of Income Tax (Appeals)-IX, Chennai-34 dated 22.2.2000 made in Appeal No.159/98-99 and Deputy Commissioner of Income Tax, Special Range-I, Madurai dated 31.3.98 made in G.I.R.NO./P.A.N.No.47-016-CQ-4063. For Appellant : Mrs.Pushya Sitaraman J U D G M E N T (Judgment of the Court was delivered by K.RAVIRAJA PANDIAN,J) The revenue on appeal against the order of the Income Tax Appellate Tribunal MADRAS 'D' Bench, Chennai dated 19.02.2007 passed in ITA.No.994/Mds/2000 by formulating the following questions of law:- " 1. Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in allowing a deduction of the amounts spent on replacement of machinery as revenue expenditure? 2. Whether in the facts and circumstances of the case, replacement of independent complete machinery can be treated as revenue expenditure? 3. Whether in the facts and circumstances, the Tribunal was right in deciding the issue without going into the concept of Block of asset?" https://hcservices.ecourts.gov.in/hcservices/ 2. It is submitted across the bar by the counsel appearing for the revenue that the above questions of law are covered by the decision of the Supreme Court in the case of Commissioner of Income Tax vs.Ramaraju Surgical Cotton Mills reported in 294 ITR 328, wherein the Judgment of this Court in Commissioner of Income Tax (Appeals) vs. Janakiram Mills Limited reported in 275 ITR 430 was considered by the Supreme Court with reference to the contention of the assessee that replacement of assets without increasing the production capacity would amount to revenue expenditure. The Supreme Court remanded the matter by observing that there are a number of tests which are required to be considered while deciding whether the expenditure was revenue or capital in nature. In the absence of the requisite details regarding the production capacity remaining constant even after replacement, the matter could not be decided on merits and require to be remitted back to the Commissioner (Appeals) for consideration of that particular issue with reference to the production capacity. In this case also, there is no material available as to the increase or otherwise of the production capacity in replacement of the machineries. Without the factual details, the question of law cannot be decided. Hence this case also require to be remitted back to the Commissioner of Appeals as done by the Supreme Court in the aforesaid decision. 3. Hence, the order of the Tribunal is set aside and the matter is remitted back to the Commissioner of Appeals to redo the exercise as directed by the Supreme Court in the case of Commissioner of Income Tax vs.Ramaraju Surgical Cotton Mills reported in 294 ITR 328. With the above observation, the appeal is disposed of. No costs. Sd/- Asst. Registrar. /true copy/ Sub Asst. Registrar. rg To 1. THE ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, RAJAJI BHAVAN, BESANT NAGAR, CHENNI-90. 2. THE INCOME TAX APPELLATE TRIBUNAL, "D" BENCH CHENNAI 3. THE COMMISSIONER OF INCOME TAX (APPEALS) IX, CHENNAI-34. https://hcservices.ecourts.gov.in/hcservices/ 4. THE DEPUTY COMMISSIONER OF INCOME TAX, MADURAI. 5. THE SECTION OFFICER, V.R. SECTION, HIGH COURT, MADRAS + 1 CC To M/s.Pushya Sitaraman,Senior Standing Counsel, SR NO.16957 Tax Case(Appeal)No.409 of 2008 NTK {CO} TP/6.5.2009. https://hcservices.ecourts.gov.in/hcservices/