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Issues Involved:
The judgment involves appeals filed by the assessee and the Revenue against the orders of the Commissioner of Income Tax (Appeals)-II, Coimbatore for the assessment years 2008-09 and 2009-10 respectively. The primary issues revolve around the classification of expenditure incurred towards modernization and replacement of machinery as either revenue or capital expenditure. ITA No. 618/Mds/2013 (Assessee's Appeal - Assessment Year 2008-09): The sole issue in this appeal is whether the expenditure on carding and chute feed machines should be treated as revenue or capital expenditure. The Commissioner of Income Tax (Appeals) sustained the disallowance of this expenditure as capital expenditure, citing the decision of the Hon'ble Supreme Court in CIT Vs. Mangayarkarasi Mills P. Ltd. The assessee contended that the expenditure is revenue in nature. The Tribunal upheld the Commissioner's decision, stating that the expenditure resulted in enduring benefit to the company, thus classifying it as capital expenditure. ITA No.603/Mds/2013 (Revenue's Appeal - Assessment Year 2009-10): The issue in this appeal pertains to the deduction claimed for the expenditure on modernization expenses for a compact drafting system. The Revenue contended that this expenditure should be treated as revenue expenditure under section 37 of the Act. The Commissioner of Income Tax (Appeals) allowed the claim of the assessee, following the decision of the Tribunal in the assessee's own case for the assessment year 2007-08. The Tribunal, in line with the earlier decision, dismissed the Revenue's appeal, holding the expenditure as revenue in nature. In both appeals, the Tribunal considered the nature of the expenditure, the enduring benefit derived from it, and relevant legal precedents to determine whether the expenses should be classified as revenue or capital expenditure. The decisions were based on the specific facts of each case and the applicable legal principles. Separate Judgement: The judgment was delivered by Shri Challa Nagendra Prasad, Judicial Member, and Shri Abraham P. George, Accountant Member.
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