TMI Blog2015 (8) TMI 1064X X X X Extracts X X X X X X X X Extracts X X X X ..... CHALLA NAGENDRA PRASAD, JJ. For the Appellant : Mr. TN Sitaraman, Advocate For the Respondent : Mr. Guru Bashyam, JCIT ORDER PER CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER : This is an appeal filed by the assessee against the order of the Commissioner of Income Tax (Appeals)-I, Coimbatore dated 04.4.2012 in IT Appeal No.346/10-11 for the Asst. Year 1995-96. The only issue in the grounds of appeal is that the Commissioner of Income Tax (Appeals) erred in directing the Assessing Officer to treat the aggregate expenditure of C.62,92,686/- incurred during the year on replacement of various items of textile machinery as capital expenditure. 2. The facts of the case are that the assessee is a company engaged in the bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apital in nature. Number of judgements have been cited before us in that regard. However, in the absence of the requisite details regarding the production capacity remaining constant even after replacement, the matter needs to be remitted to the CIT(A). There is one more reason why we are inclined to remit the matter. As stated above, the impugned judgment of the Madras High Court in the case of Janakiram Mills Ltd. (supra) has been set aside by this Court as there was confusion between the tests to be applied in respect of s.31 vis- -vis the test to be applied in case of s.37 of the IT Act. Without expressing any opinion on the merits of the case we remit the matter to CIT(A) who will decide the question in accordance with law. Meanwhi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the increase in production capacity on account of increase in spindleage. 8. We have heard the rival submissions, perused the material placed on record and the judgments relied upon. We find that on identical facts, the Co-ordinate Bench of this Tribunal in the case of The Kumaran Mills Ltd. v. ACIT in ITA No.754/Mds/2012 for the Asst. Year 1994-95, dated 12 Sept 2012, held that replacement of draw frames are capital expenditure not allowable as deduction under sec.37 of the Act. The Co-ordinate Bench held as under :- 5. We have heard both the sides, perused the records and gone through the orders of the authorities below. The only issue for adjudication before us is whether the expenditure incurred for the purpose of replacement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this Court dated 25-04-2011 in Tax Case (Appeals) Nos. 71 and 72 of 2008. 12. In view of the above, following the same, the substantial question of law 1 and 2 raised in this tax case appeal are answered against the assessee and in favour of the revenue. 13. With regard to the third substantial question of law, it is submitted by the learned counsel for the appellant that when each of the machinery in question such as Ring Frames, Draw Frames and Speed Frame is purchased for the first time, then it is a capital asset, on which depreciation should be granted. Whereas, it is submitted that the sale of a worn out machinery and replacement thereof by new machinery can only be treated as reduction and addition to the block of assets, whic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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