The Commissioner of Income Tax vs The Silical Metallurgic Ltd.

K. Raviraja Pandian, J.—The revenue is on appeal against the order of the Income Tax Appellate Tribunal MADRAS ''D'' Bench, Chennai

dated 31.8.2005 passed in ITA. Nos. 1346 and 1347/Mds/2002 relating to the assessment years 1993-94 and 1994-95 respectively. The

substantial questions of law formulated for entertainment of the appeals are as follows:

Whether the replacement of machinery parts will amount to revenue expenditure or not ?

Whether bringing into existence of a new asset or obtaining a new advantage would amount to revenue expenditure or not ?

It is submitted across the bar by the learned Counsel appearing on either side that the above question of law is covered by the decision of the

Supreme Court in the case of Commissioner of Income Tax Vs. Ramaraju Surgical Cotton Mills, , wherein the Judgment of this Court in India

Cine Agencies Vs. Deputy Commissioner of Income Tax, 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 questions 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.

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, . With the above observations, the appeals

are disposed of. No costs.