Madras High Court
Commissioner Of Income Tax I vs M/S.Tvs Motor Company Ltd on 30 November, 2021
T.C.A.No.718 of 2009
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED : 30.11.2021
CORAM :
THE HON'BLE MR. JUSTICE R. MAHADEVAN
AND
THE HON'BLE MR. JUSTICE MOHAMMED SHAFFIQ
T.C.A.No.718 of 2009
Commissioner of Income Tax I
Chennai. ... Appellant
Versus
M/s.TVS Motor Company Ltd.,
29 Haddows Road,
Chennai 600 006.
PAN: AAACS7032B ...
Respondent
Appeal preferred under Section 260A of the Income Tax Act, 1961,
against the order of the Income Tax Appellate Tribunal, Madras “D” Bench,
dated 16.01.2009 in I.TA.No.490/Mds/2008.
For Appellant : Mr.M.Swaminathan,
Senior Standing Counsel assisted by
Mrs.S.Premalatha, Junior Standing Counsel
For Respondent : Mr.R.Venkatanarayanan
for M/s.Subbaraya Iyer
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T.C.A.No.718 of 2009
JUDGMENT
(Judgment was delivered by R.MAHADEVAN, J.)
This tax case appeal filed at the instance of the Revenue, calling in
question the correctness of the order dated 16.01.2009 passed by the Income
Tax Appellate Tribunal Madras 'D' Bench, in I.T.A.No.490 /Mds/2008,
relating to the assessment year 2001-02, was admitted by this court on
04.08.2009, on the following substantial question of law:-
“ Whether on the facts and circumstances of the case, the
Tribunal was right in holding that expenditure on replacement
of dies and moulds are to be allowed as cur rent repairs?
2. Today, when the matter was taken up for consideration, the learned
counsel for the appellant / Revenue as well as the respondent / assessee
jointly submitted that the issue involved herein has already been considered
and decided by this Court in favour of the assessee by judgment dated
09.01.2014, passed in TCA.Nos.173 and 174 of 2009, the relevant passage
of which, is usefully extracted hereunder:
“29. As regards the expenditure on dies & moulds, the
assessee pointed out that it debited an amount of
Rs.11,17,68,169/- towards dies and moulds only to replace
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T.C.A.No.718 of 2009
them in the place of worn out dies and moulds. The assessee in
the memorandum of income added this amount to the total
income and claimed the cost of dies and moulds of
Rs.22,66,52,504/- under Section 31 of the Act. The assessee
stated that within a period of one year of installation, the life of
the dies and moulds would become obsolete and this was due
to high production involved. Thus, replacement of the new dye
in the place of old dye would quality for current repairs under
Section 31 of the Act. The Assessing officer, however, rejected
the contention of the assessee and the Assessing Officer
pointed out that the assessee was claiming depreciation upto
1999-2000 under Section 32 of the Act and only in the year
under consideration, it started claiming deduction under
Section 31 of the Act. The Tribunal pointed out that the dies
and moulds were not plant and machinery, yet the replacement
of dies and moulds were not in the nature of installation of
machinery in the factory. Such moulds and dies were
normally attached to the machines to suit the individual
requirement of particular product. So holding, the Tribunal held
that expenditure incurred on replacement of dies and moulds
was revenue in nature. It relied on the decision of Karnataka
High Court in the case of Mysore Spun Concrete Pipe Pvt. Ltd.,
reported in 194 ITR 159.
30. As far as this issue is concerned, learned counsel
appearing for the assessee placed reliance on the decision of
this Court reported in (2013) 357 ITR 720 (Mad) in the case of
Super Spinning Mills Ltd., Vs. Assistant Commissioner of
Income-tax related to the expenditure on replacement of the
machinery parts. The assessee therein engaged in the business
of manufacture and trading in cotton yarn and allied products
and the assessee incurred expenditure in respect of replacement
of certain textile machinery. On a question as to whether such
replacement of parts would be current repairs of capital in
nature, this Court considered the decisions in the case of CIT
Vs. Saravana Spinning Mills P; Ltd., reported in (2007) 293
ITR 201 (SC), CIT Vs. Ramaraju Surgical Cotton Mills
reported in (2007) 294 ITR 328 (SC) and CIT Vs.
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T.C.A.No.718 of 2009
Mangayarkarasi Mills P.Ltd., reported in (2009) 315 ITR 114
(SC) and pointed out that the question as to whether the
expenditure incurred on replacement of machinery is revenue or
capital rests on the nature of capital incurred vis-a-vis the
benefit derived. This Court referred to the decision in the case
of CIT Vs. Saravana Spinning Mills P.Ltd., reported in (2007)
293 ITR 201 (SC) and in particular to the decision in the case
of CIT Vs. Sri Mangayarkarasi Mills P.Ltd., reported in (2009)
315 ITR 114 (SC) and pointed out as under:-
" 10. The question as to whether the expenditure
incurred on replacement of machinery is revenue or
capital expenditure, particularly in the nature of
replacements of parts, thus rests on the nature of
expenditure incurred, vis-a-vis the benefit that the
assessee derives. The ratio deductible from the decisions
referred to above are:
(i) To decide the applicability of Section 31(i),
the test is not whether the expenditure is revenue or
capital in nature, but whether the expenditure is "current
repairs". The basic test is to find out whether expenditure
is incurred to "preserve and maintain" an already existing
asset and the expenditure must not be to bring a new
asset into existence or to obtain a new advantage vide
[2007] 293 ITR 201 (SC) (Commissioner of Income Tax
Vs. Saravana Spinning Mills P. Ltd.)
(ii) Under Section 31(i), the deduction
admissible is only for current repairs. Therefore, the
question as to whether the expenditure incurred by the
assessee conceptually is revenue or capital in nature is
not relevant for deciding the question whether such
expenditure comes within the etymological meaning of
the expression "current repairs". In other words, even if
the expenditure is revenue in nature, it may not fall in the
connotation of "current repairs" - [2007] 293 ITR 201
(SC) (Commissioner of Income Tax Vs. Saravana
Spinning Mills P. Ltd.)
(iii) A new asset or new/different advantage
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T.C.A.No.718 of 2009
cannot amount to `current repairs'. - 2009-TIOL-86-SC-
II (CIT Vs. Sri Mangayarkarasi Mills P. Limited)
(iv) Repair implies existence of a part of the
machine which has malfunctioned, thereby requiring
repair to that machinery, plant etc. Replacement cannot
be a current repair, for, "replacement" and "current
repair" do not go hand in hand . If one is to hold
otherwise, it would only make Section 31(i) wholly
redundant and absurd. Thus, replacement expenditure
cannot be said to be `current repairs' vide [2007] 293
ITR 201 (SC) (Commissioner of Income Tax Vs.
Saravana Spinning Mills P. Ltd.) and 2009-TIOL-86-SC-
II (CIT Vs. Sri Mangayarkarasi Mills P. Limited)
(v) Expenditure is deductible under section 37
only if it (a) is not deductible under sections 30-36, (b) is
of a revenue nature, (c) is incurred during the current
accounting year and (d) is incurred wholly and
exclusively for the purpose of the business. - 2009-
TIOL-86-SC-II (CIT Vs. Sri Mangayarkarasi Mills P.
Limited);
(vi) Expenditure is of a capital nature when it
amounts to an enduring advantage for the business and
repair is different from bringing a new asset for the
business. Further, bringing into existence a new asset or
an enduring benefit for the assessee amounts to capital
expenditure vide Lakshmiji Sugar Mills (P) Co. v. CIT
(AIR 1972 SC 159) referred in 2009-TIOL-86-SC-II
(CIT Vs. Sri Mangayarkarasi Mills P. Limited).
(vii) Therefore, whether an expenditure is revenue
or capital in nature would depend on the facts of each
case. - [2007] 293 ITR 201 (SC) (Commissioner of
Income Tax Vs. Saravana Spinning Mills P. Ltd.)"
This Court also referred to the decision in the case of CIT Vs.
Mahalakshmi Textile Mills Ltd., reported in (1967) 66 ITR 710
(SC) on the issue of current repairs and pointed out that so long
as there is no change in the performance of the machinery and
the parts that were replaced performing precisely the same
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T.C.A.No.718 of 2009
function, expenditure could only be concerned as current
repairs of the plant and machinery.
31. Applying the ratio of the decision cited above, when
we look into the facts of the above cases, it is evident that with
regard to the moulds and dies attached to the machinery like
press designs specification, moulds and dies are not
independent of the plant and machinery, but are parts of the
machinery. Once the dies are worn out, the machines cannot
turn out the product to the business specifications and this has
to be obtained only on a replacement of the dies and moulds, a
fact which is not refuted by the revenue. It is no doubt true that
the assessee claimed depreciation on dies and moulds. Yet in
the decision in the case of CIT Vs. Mahalakshmi Textile Mills
Ltd., reported in (1967) 66 ITR 710 (SC), the Apex Court
pointed out that all questions whether of law or of fact, which
relate to the assessment year of the assessee could be raised in
any year under consideration before the Officer as well as
before the Income Tax Appellate Tribunal too and if, for
reasons recorded by the departmental authorities in rejecting a
contention raised by the assessee, the grant of relief to an
assessee is justified on another ground, the Revenue is bound to
consider such claim of granting the relief. The Apex Court
pointed out that the right of the assessee to the relief is not
restricted to the plea raised by him. On the facts before us,
when the dies and moulds were attached to the machine to
manufacture the designed product, we have no hesitation to
accept the plea of the assessee that the claim would fall for
consideration only under Section 31 of the Act.
32. In the unreported decision of this Court dated
27.04.2012 in Tax Case (Appeal).No.1011 of 2005 (The
Commissioner of Income Tax, Madurai Vs. M/s.Machado
Sons) on the question of repair made to a ship, this Court
pointed out that when the object of the expenditure was not for
bringing into existence a new asset or to obtain a new
advantage, the said expenditure qualifies to be considered as
current repairs under Section 31 of the Act. In so holding, after
referring to the decision of the Apex Court in the case of CIT
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T.C.A.No.718 of 2009
Vs. M/s.Saravana Spinning Mills P.Ltd., reported in (2007)
293 ITR 201, this Court further pointed out to the decision of
the Apex Court where it cautioned that all repairs are not
current repairs on Section 31(1) of the Act; Section 31(1) of
the Act limits the scope of allowability of expenditure as
deduction in respect of repairs made to machinery, plant or
furniture by restricting it to the concept of "current repairs".
Thus, this Court pointed out that what is allowable as revenue
expenditure under Section 37 of the Act are those expenditure
other than one falling for consideration under Sections 30 to 36
of the Act. The Apex Court further pointed out the example
that when the picture tube in a television set is replaced, such
repairs would come within the connotation of the phrase
"current repairs". Thus, applying these two decisions, we have
no hesitation in rejecting the Revenue's appeal. We hold that
the claim being considered as current repairs, the same would
fall under Section 31 of the Act as current repairs. To that
extent, we modify the order of the Tribunal. ”
3.Following the aforesaid judgment, the substantial question of law is
answered against the Revenue and this Tax Case Appeal stands dismissed.
No costs.
(R.M.D., J.) (M.S.Q., J.)
30.11.2021
av
Internet : Yes
Index : Yes / No
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T.C.A.No.718 of 2009
R. MAHADEVAN, J.
and
MOHAMMED SHAFFIQ, J.
av
To
1. The Commissioner of Income Tax - I
Chennai.
2.The Income Tax Appellate Tribunal,
Madras, “D” Bench.
3. The Assistant Commissioner of Income Tax,
Company Circle - III (2), Chennai.
T.C.A.No.718 of 2009
30.11.2021
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