TMI Blog2013 (8) TMI 1165X X X X Extracts X X X X X X X X Extracts X X X X ..... y the assessee against the order of the Commissioner of Income Tax (Appeals)-II, Coimbatore dated 30.01.2013 for the assessment year 2008-09 and the sole issue in this appeal is that the Commissioner of Income Tax (Appeals) failed to appreciate that the expenditure incurred towards modernization and replacement of machinery is revenue expenditure and not capital expenditure. 3. The Assessing Officer while completing the assessment disallowed cost of certain machineries i.e. carding and chute feed machines and cost of compact spinning system treating the said expenditure as capital expenditure as against the claim of the assessee that it is only a revenue expenditure. The Commissioner of Income Tax (Appeals) in so far as the expenditure o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chase of carding and chute feed machines. For these machineries, the assessee submitted that there is no increase in number of Spindlage before and after replacement and hence it is to be held as revenue expenditure as held in the case of Sri Karthikeya Spinning Mills ( 2004 265 ITR 285 (Mds) 6.1 According to me, the expenditure of the assessee in the purchase of above machineries has resulted in enduring benefit to the Company and therefore is clearly a capital expenditure squarely covered by the decision of the Hon'ble Apex Court in the case of CIT vs. Mangayarkarasi Mills Pvt Ltd. reported in 315 ITR 114. 6.2 Hence respectfully following the judgement of the Hon'ble Apex Court in the case of Mangayarkarasi Mills Pvt L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee by the decision of the co-ordinate Bench of this Tribunal in the assessee s own case for the assessment year 2008-09 in ITA No.593/Mds/2013 dated 9.7.2013. A copy of the order is placed on record. 11. The Departmental Representative relied on the order of the Assessing Officer. 12. Heard both sides. Perused the orders of lower authorities and the decision of the co-ordinate Bench of this Tribunal in the assessee s own case for the earlier assessment year i.e. 2008-09. The Commissioner of Income Tax (Appeals) following the decision of Tribunal in the assessee s own case for the assessment year 2007-08 in ITA No.1847/Mds/2011 dated 20.01.2012 allowed the claim of the assessee holding that expenditure on compact spinning system is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he relevant details, we have found that this is a single piece gadget which is fixed to each Spindle. It is not a machinery by itself but only an attachment to the machine (like manual analog wall clock is fixed with battery operated system). It has been claimed as revenue expenditure. The old drafting systems have become scrap on replacement. The ld. A.R has taken us through a set of colour photographs to illustrate the nature and working of this 'Compact Spinning System'. It is seen from the records [paper book page 5] that the assessee had purchased 33 number of ring frames and 18 ring frames fitted with gadgets. The company has purchased 18 number of sets, as one set is required for one ring frame. Thus, total number of gadg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to manufacture earlier quality of yarn catering to the requirement of lower strata of the society. Out of 50 ring frames, only 37 ring frames are fitted with this gadget and the remaining are running with conventional gadget. This fact was also found to be undeniable and to be correct. It was also found to be a fact that the old drafting systems simply become scrap on replacement and cannot be used again as such. We are convinced that the yarn normally contains hairy substance like bristles on the side of the thread and when this yearn is sent through the 'Compact Spinning System', these hairy substances are removed and yarn gets a shining. Manufacturing premium quality of yarn which fetches higher price in the market and attra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... introducing the Compact Spinning System is Revenue in nature and is thus an allowable expenditure. 7. Since the issue in hand is similar to the one decided by the Co-ordinate Bench of the Tribunal, we respectfully follow the decision of the Tribunal in assessee s own case for the AY. 2007-08, and dismiss this appeal of the Revenue holding the expenditure incurred by the assessee on introducing Compact Spinning System as Revenue Expenditure. Accordingly, the appeal of the Revenue is dismissed. 13. Respectfully following the decision of the co-ordinate Bench of this Tribunal, we reject the grounds of appeal of the Revenue. 14. In the result, the appeal of the Revenue is dismissed. 15. To sum up, both the appeals of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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