Replacement of machines as a whole cannot be held as revenue expense

CIT Vs. The Jawahar Mills Ltd. (Madras High Court)

The total replacement cost of three machineries in question purchased by the Assessee amounting to Rs.54,59,149/- came to be allowed by the Tribunal as ‘repairs maintenance expenditure’ or ‘revenue expenditure’. The said findings of the learned Tribunal are clearly contrary to the decision of the Hon’ble Supreme Court (cited supra) and therefore, the view of the Tribunal cannot be sustained and the replacement of the machineries as a whole by the Assessee cannot be held to be current repairs or allowable revenue expenditure.

FULL TEXT OF THE HIGH COURT ORDER / JUDGEMENT

(Judgment of the Court was delivered by DR.VINEET KOTHARI,J.) The Revenue has filed these appeals under Section 260A of the Income Tax Act, 1961 by raising the substantial question of law arising from the order in ITA No.1334/Mds/99 and ITA No.1335/Mds/99 respectively on 04.02.2005 for Assessment Years 1993-94 and 1994-­95.

2. The Tribunal by its impugned order allowed the cost of replacement of machineries like Motor Rollers, Spindles, Gears etc. in the Textile Mill of the Assessee with the following observations:

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