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TMI Blog2013 (11) TMI 130X X X X Extracts X X X X X X X X Extracts X X X X ..... ed with rotors and other parts of the intermix machine – Decided against revenue. - - - - - Dated:- 14-9-2012 - Order The order of the Bench was delivered by N. R. S. Ganesan (Judicial Member).-Whereas the appeal in I. T. A. No. 467/Coch/2009 is filed by the taxpayer against the order of the Commissioner of Income-tax (Appeals) dated June 5, 2009 for the assessment year 2006-07, appeal in I. T. A. No. 280/Coch/2010 is filed by the Revenue against the order of the Commissioner of Income-tax (Appeals) dated February 17, 2010 for the assessment year 2007-08. Since common issue arises for consideration in both appeals, we heard them together and dispose of the same by this common order. The first common ground arises for consideration is with regard to disallowance of the cost of chamber assembly. Shri K. I. John, the learned representative for the taxpayer, submitted that the taxpayer is engaged in the business of manufacture of tread rubber. According to the learned representative, in the course of its business activity, the taxpayer has replaced the chamber assembly, which is a part of intermix machine consisting of motor, gear box, top cylinder, chamber assembly, hydraul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same as capital expenditure. Since the facts are not in dispute, according to the learned representative, the order of the Commissioner of Income-tax (Appeals) for the assessment year 2006-07 is not justified. We heard Ms. Veni Raj, the learned Departmental representative also. The learned Departmental representative submitted that the chamber assembly is one of the parts of intermix machine which cannot perform any function independently. However, the learned Departmental representative submitted that replacement of chamber assembly gives an enduring benefit to the taxpayer. Therefore, the cost of such replacement has to be treated as capital expenditure. According to the learned representative, the complete replacement of chamber assembly has to be treated as capital expenditure. Therefore, the judgment of the apex court in the case of Saravana Spinning Mills P. Ltd. [2007] 293 ITR 201 (SC) would be applicable to the case of the taxpayer. We have considered the rival submissions on either side and also perused the material available on record. Admittedly, the taxpayer is in the business of manufacturing tread rubber. The taxpayer has also received income from mixing char ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cotton yarn, melange yarn, colour melange, polyester viscose yarn and the process of manufacture goes through various segments/ divisions. The first segment is the blow room. The function of the blow room is to clean the raw cotton thoroughly before it is fed to the carding department. The function of the carding department is to remove the waste in the cotton received from the blow room. In the carding department there are individual carding machines. They are equipped with auto levelers to produce sliver. The carding machine removes neps formed in the blow room line during the process. The carding machine produces sliver for better quality of yarn. This sliver produced in the carding department is carried to the combing department for manufacturing combed yarn. After the carding operation, the impurities present in the sliver will be removed in the combing department. That sliver which is produced in the combing department will pass through the draw frames used in the drawing department in order to obtain parallel fibres. These parallel fibres go through speed frames in the roving department in order to convert the sliver into thinner forms called roves which roves are thereafte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... because the assessee does not replace the air-condition machine. At the highest, he replaces a part of the air-condition machine. So is the case of the picture tube in a television set, when the picture tube is replaced the television set is not replaced, therefore, such repairs alone can come within the connotation of the word 'current repairs' in section 31(i) of the said Act as it stood at the material time. They are effected to preserve and maintain the asset, viz., air-conditioner or carding machine. Lastly, it cannot be said that the textile mill constitutes a plant as it is one continuous process of manufacture beginning from blow room to the winding section. As stated above, different outputs flow from different segments of production like blow room, carding, combing, roving, winding, etc. In the case of a textile mill there is no process whereby raw material is fed on one end and the finished product comes out at the other end without intervention in between. For example, in the case of continuous casting machine in the steel industry we have one continuous integrated process under which scrap (raw material) is put in and what comes out is steel or iron or aluminium. Anot ..... X X X X Extracts X X X X X X X X Extracts X X X X
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