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TMI Blog2002 (3) TMI 242X X X X Extracts X X X X X X X X Extracts X X X X ..... LMW Ltd. (4 Nos.) 10-1-1996 153785 64,44,252 KG Mills Draw Frame LMW Ltd. (2 Nos.) 19-2-1996 154270 32,44,630 SKG Mills Draw Frame (3 Nos.) 4,20,162 1990 Total 1,00,37,315 5,46,082 Note: Value withdrawn in respect of 3 Draw Frames of two deliveries each Rs. 1,50,000 Asst. yr. 1997-98 Name of new replacing machinery No. Net cost (excluding Modvat credit) Name of old replaced machinery No. Year of purchase Cost Karthik Mills Rs. Rs. Cone Winder 1 3,95,015 marata Cone winder (sale valuer Rs. 10,000) 1 1957 34,686 Carding Machines 10 1,89,36,130 Howa Carding (sale value Rs. 1,40,000) 4 1953 43,080 Howa Carding 3 1952 32,310 MMC Carding value Rs. 2,55,000) 3 1988-89 1,22,589 KG Mills LMW Draw Frame 1 17,22,600 SKG Mills LR Draw Frame 2 35,25,158 Draw Frame DF 800 (sale value Rs. 50,000) 2 Deliveries each 2 1990 2,89,628 Total 2,45,78,903 The reasonings of the AO for disallowing the claim for the asst. yr. 1996-97 were that the assessee has capitalised the above replacement in its books of account; there is no replacement of is in draw frame in Karthik Mills and K.G. Mills but there is only replacement in S.K.G. Mills whereas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in S.K.G. Mills but while working the depreciation it was shown that there is no removal from Karthik Mills or K.G. Mills. The figure in the block of assets will be the same if the replacement in Karthik Mills and K.G. Mills is taken into account and a pro rata addition is taken in S.K.G. Mills at written down value. It was further submitted that the observation of the AO that there is no "one-to-one" replacement is not factually correct. The learned authorised representative further submitted that the assessee had acquired 6 numbers of draw frames of one delivery each aggregating to 6 deliveries whereas the replaced item is of 3 items of two delivery each aggregating to 6 deliveries whereas the replaced item is of 3 items of two delivery each aggregating to 6 deliveries and hence the replacement is also "one-to-one". The learned authorised representative relied on a catena of decisions of both the jurisdictional High Court as well as the Tribunal. 7. The learned Departmental Representative submitted that the AO has mentioned that the modernisation were carried on Blow Room Division, Carding Division, Draw Frame Division/Spinning Division, Cone Winding Division, Auto Coner, Genera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee mill will clarify several doubts and will also help to come to a correct conclusion in the issues in hand. The learned authorised representative for the assessee also accepted the suggestion made by the learned Departmental Representative. Accordingly, an inspection had been conducted on 8th Feb., 2002, in the premises of M/s Surya Prabha Mills (P) Ltd. Kuniamuthur, Coimbatore, and two units of Kadri Mills, namely, M/s Karthik Mill and M/s K.G.S. Mill. During the inspection, the assessee's representative Shri J. Prabhakar of M/s Jagadeesan & Co., C.As., Chennai, Shri R. Mahadevan, chartered accountant, M/s Gopalaiyer and Subramaniam, chartered accountants, Coimbatore, and Shri M.J. Vijayaraghavan chartered accountant of M/s M.S. Jagannathan & Vishvanathan, chartered accountant, Coimbatore and on behalf of the Revenue Shri N. Rangarajan, Dy. CIT, Shri M. Dhandapani, Asstt. CIT, and Shri G. Swamydas, Inspector of Income-tax, were present. 8. We have inspected M/s Surya Prabha Mills (P) Ltd., Coimbatore. In the case of this assessee, for the asst. yr. 1994-95 in ITA No. 1601/Mds/98, the Tribunal 'A' Bench, on identical facts decided the issue in favour of the assessee following ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hese laps have predetermined weight per unit length to meet the desired standard. Carding: The impurities still lying in the laps and certain amount of short fibers are eliminated in this process. Individualisation and parallelisation of the fibers are effected by repeated brushing. The final product of carding is delivered in the form of sliver. Combing: The carded slivers are fed into the sliver lapping machine to get sliver laps which are again drafted into ribbon laps. The ribbon laps are then combed by feeding into comber machines. Combing process is used for removing greater part of short fibres and for achieving a high degree of fibre parallelisation which is necessary for the spinning of high quality yarn. Drawing: In this process several slivers received from carding and on combing are drawn and reduced to the thickness of one sliver by doubling and drafting to get improved blending and parallelisation of fibers. This process helps to enhance uniformity and strength of the yarn. Simplex: The finished drawing sliver passes through a stage of processing called simplex. In this process, necessary drafts are employed to make the sliver into further thinner ends and a limit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on machines. Combing process is used for removing greater part of short fibres and for achieving a high degree of fibre parallelisation which is necessary for the spinning of high quality yarn. Drawing: In this process several slivers received from carding and/or combing are drawn and reduced to the thickness of one sliver by doubling and drafting to get improved blending and parallelisation of fibres. This process helps to enhance uniformity and strength of the yarn. Simplex: The finished drawing sliver passes through a stage of processing called simplex. In this process, necessary drafts are employed to make the sliver into further thinner ends and a limited twist is applied to bind the fibres and then it is wound on bobbins as roves." 12. A careful study of the entire material pointing out to the one answer, i.e., the replacement to the existing machineries are nothing but current repairs and the expenditure incurred is of revenue in nature. At no stretch of imagination, this can be considered as capital in nature. The machines are dependent on each other and they are not independent. What has been produced before the final stage of the spinning has no marketability. Further, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 1709/Mad/1995; 19. Super Spinning Mills Ltd.; ITA No. 2932/Mad/1987; 20. Surya Prabha Mills Ltd.; ITA No. 1501/Mad/1998; 21. Sir Varadaraja Textiles; ITA Nos. 937 & 938/Mad/1983; 22. Ambika Cotton Mills Ltd.; ITA Nos. 1698-1700/Mad/1999 ITA No. 216/Mad/2000; 23. Durairaj Mills Ltd.; ITA No. 1364/Mad/1999; 24. Suguna Mills Ltd.; ITA No. 1856/Mad/1999; ITA No. 1540/Mad/2000 25. CIT vs. Sakthi Textiles Ltd. (2001) 120 Taxman 268 (Mad). 15. Further, we may mention here that the assessee's authorised representative had filed a certificate issued by The South India Textiles Research Association, Coimbatore, dt. 6th Dec., 1999, which reads as under: "On scrutiny of the data furnished by M/s The Kadri Mills (Cbe) Ltd. Coimbatore to Sitra vide their letter, dt. 1st Dec., 1999, regarding modernisation work of Karthik Mills, K.G. Mills, K,G.S. Mills and S.K.G. Mill, we are of the opinion that most of the works reportedly carried out by these mills during 1st April, 1995 to 31st March, 1996 are towards repairs and maintenance of machinery and replacement of store items excepting electronic yarn clearers for cone widing and apron doffing devices and 'C' clears attachments for cardi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the Tribunal and those cases relied upon by the Department in this regard, are not convincing to us and being those case laws not directly relevant. We may state in this regard that worthy of being quoted is the decision of the jurisdictional High Court in the case of CIT vs. L.G. Ramamurthi 1977 CTR (Mad) 416 : (1977) 110 ITR 453 (Mad) as follows: "No Tribunal of fact has any right or jurisdiction to come to a conclusion entirely contrary to the one reached by another Bench of the same Tribunal of the same facts. It may be that the members who constituted the Tribunal and decided on the earlier occasion were different from the members who decided the case on the present occasion. But what is relevant is not the personality of the officers presiding over the Tribunal or participating in the hearing but the Tribunal as an institution. If it is to be conceded that simply because of the change in the personnel of the officers who manned the Tribunal, it is open to the new officers to come to a conclusion which had been reached by the earlier officers manning the same Tribunal on the same set of facts, it will not only shake the confidence of the public in judicial procedure as suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence, reference for larger Bench does not arise. Hence, this is not referred to the Hon'ble President for such constitution. 20. A well settled position should not be disturbed when there are catena of decisions by various High Courts and Tribunal. To this proposition our view is fortified by the decision of the apex Court in the case of CIT vs. Balakrishna Malhotra (1971) 81 ITR 759 (SC) wherein their Lordships observed as under: "affirming the decision of the High Court, that, since the decision of the Madras High Court had been rendered as long back as 1953, and no other High Court had taken a contrary view, and the Revenue must have in all the years thereafter acted on the basis of that decision, and the Courts could not ignore the harm that was likely to be caused by unsettling the law, and the corresponding scheme in the 1961 Act was materially different, the Supreme Court was not justified in departing from the interpretation placed by the Madras High Court in Viswanathan Chettiar's case though a different view of the law might be reasonably possible." Here in this case various case laws cited supra are only supporting the case of the assessee. Thus, the well settled posi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to arrive at adjusted business profits. In this connection the decision of the Bombay High Court in the case of CIT vs. Punit Commercial Ltd. (2000) 163 CTR (Bom) 594 : (2000) 245 ITR 550 (Bom) is relied upon. Even otherwise, the words used in s. 80HHC(4B), Expln. (baa), refers only to "Receipts by way of brokerage, commission, interest, rent charges or any other receipts of a similar nature". The items deducted at 90 per cent in this case are not items of similar nature to interest, etc. Hence, deducting 90 per cent of the above items are not proper. 24. On the other hand, the learned Departmental Representative strongly supported the orders of the Revenue authorities. He contended that these receipts, viz. yarn conversion charges, miscellaneous income like gunny bag sales, insurance claim and premium on hank yarn obligation are all not derived from the export business of the assessee. These are all items of incomes and hence the Revenue authorities were correct in deducting 90 per cent of such incomes while computing deduction under s. 80HHC in arriving at the adjusted business profits. He relied on the following case laws: (i) CIT vs. Eastern Seafoods Exports (P) Ltd. (1995) 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 1994-95 in the case of M/s Sethu Leathers vs. Asst. CIT (order dt. 23rd March, 2001) has already held that the job receipts towards work done for other parties are to be excluded while arriving at the profits of the business in computing the deduction under s. 80HHC of the Act. In our considered opinion yarn conversion charges are nothing but job work receipts received by the assessee and hence following our earlier decision cited supra, we are inclined to uphold the orders of the Revenue authorities in excluding 90 per cent of this job receipts "yarn conversion charges" from the profits of the business while computing deduction under s. 80HHC of the Act. Thus, the above ground is partly decided in favour of the assessee. 26. The 3rd common ground of appeal reads as under: "The CIT(A) erred in holding that sales-tax, excise duty collections, etc. form part of total turnover for purposes of computing relief under s. 80HHC." We have heard rival submissions and considered the facts and materials on record. In our considered opinion the point at issue is now squarely governed by the only decision of the Bombay High Court in the case of CIT vs. Sudarshan Chemicals Industries Ltd. ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... At the time of hearing, the learned counsel for the assessee, apart from relying upon the ground of appeal as extracted above, contended, to say in brief that: It is submitted that the disallowance made is without proper appreciation of less than the market rent paid by the assessee to the close relation and no attempt was made to ascertain the market value as set out in s. 40A(2)(b) of the Act. While the rent paid is the same as in asst. yr. 1991-92, the disallownace is the same without considering the escalation in rental value of similarly situated building at Coonoor. It is further submitted that what was excessive rent for the year 1991-92, need not be the excessive rent for the assessment years under consideration. On the other hand, the learned Departmental Representative relied on the orders of the authorities below and urged us no interference is called for at this stage. 29. We have heard rival submissions and considered the materials on hand. It is evident from the copy of the order of the first appellate authority for the asst. yr. 1991-92, which forms part of the paper book at pp. 32 to 37, that during that year the assessee paid an amount of Rs. 90,000 as rent for n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ingling out the expenditure incurred in the sum of Rs. 8,36,302 spent on yarn cleaners as not eligible for deduction under the head "Repairs". The CIT(A) erred in holding that these are independent machines in any event, even, if these are independent items, these are to be allowed as on revenue account as per the decisions of Courts of law." At the time of hearing the learned counsel for the assessee contended that even according to the report of SITRA, the item in question is only an attachment for carding machine and hence is to be allowed as a revenue expenditure, though not as replacement expenditure. Yarn cleaner is not an independent machinery and is a fixture to an existing carding machine for purposes of clearning the yarn in production. In view of this the learned counsel for the assessee submitted that the item in question is to be allowed as a revenue expenditure especially considering the decision of Kerala High Court in CIT vs. Steel Complex Ltd. On the other hand, the learned Departmental Representative vehemently supported the orders of the Revenue authorities and contended that there is no necessity for the Tribunal to interfere with the same. 32. We have heard r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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