9911796707
TMI Blog2002 (11) TMI 46X X X X Extracts X X X X X X X X Extracts X X X X ..... rst appellate authority and the Tribunal on this point and direct the assessing authority to consider this question in the light of the principles laid down by this court in the assessee's case mentioned supra and in the light of the observations contained herein. It is open to the assessing authority to arrange for an inspection of the sugar factory of the assessee with notice to the assessee for the purpose of ascertaining the correct factual situation and a decision will be taken by the assessing authority as directed above thereafter. - - - - - Dated:- 22-11-2002 - Judge(s) : G. SIVARAJAN., K. BALAKRISHNAN NAIR. JUDGMENT The judgment of the court was delivered by G. SIVARAJAN J.-This appeal is filed by an assessee to income-ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of law for decision. "1. Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in holding that the expenditure incurred by the assessee in the matter of replacement of the manually operated crane by an electrically operated crane is a capital expenditure? 2. Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in holding that the E. O. T. crane was totally new and independent machinery without which the other machinery can work and therefore the expenditure incurred by the assessee is a capital expenditure? 3. Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in holding that this is a case where the assessee had introduced a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt in CIT v. Mahalakshmi Textile Mills Ltd. [1967] 66 ITR 710, and the decision of this court in Vanaja Textiles Ltd. v. CIT [1994] 208 ITR 161 and thereafter observed as follows: "The case of the assessee is that the old M.O.T. crane was replaced by a better efficient crane, i.e., an electronically operated crane. This is actually a replacement of the old machinery for overall improvement and efficiency of the company." The appellate authority on that basis held that the expenses have to be treated as revenue expenditure. The Tribunal held that the decisions relied on by the first appellate authority are distinguishable and observed as follows: "In both the cases, some parts of the existing machinery were changed though such change ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a new asset by purchasing each such machinery has come into existence and, therefore, the expenditure incurred by the assessee on the acquisition and installation of such assets cannot be said to be expenditure incurred on repairs or replacement of some of the accessories of such independent equipment. This view of the Assessing Officer was upheld by the first appellate authority. However, the Tribunal held that each machinery, though has distinct function, is an integral part of the sugar plant and sugar manufacturing process is a continuous process and unless the sugarcane juice as such or in a different form passes through all the requisite components, the sugar, which is the end-product of the sugar mill, cannot be produced; that none ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld be available only after the entire processing is complete and that would be complete only after the completion of the processing through all the machinery on which the expenditure was incurred by the assessee. Simply because each equipment changes the form or shape of the sugarcane juice, that does not mean that sugar is produced by each equipment or machinery. This being so, there is a basic fallacy in the approach of the Assessing Officer and the appellate authority." Regarding the further contention advanced by senior standing counsel for the Revenue that a considerable expenditure was incurred by the assessee on each machinery and some of the machinery was replaced after 17 years of service and, therefore, the expenditure so incur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed sugar plant and not vis-a-vis each integral part of it. When expenditure incurred on technical know-how on consideration of 'once for all payment' was held to be the expenditure as revenue in nature in the case of Alembic Chemical Works Co. Ltd. [1989] 177 ITR 377 (SC), we see no reason why expenditure incurred on purchasing of new machinery to ensure sound functioning of the sugar mill to replace the old ones, should not be held as revenue expenditure." We have also extracted the relevant findings of the three authorities. In view of the abovesaid decision of this court in the assessee's own case, what is necessary to be found was whether the electrically operated crane which is acquired and installed is an integral part in the proces ..... X X X X Extracts X X X X X X X X Extracts X X X X
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