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TMI Blog2017 (2) TMI 1447X X X X Extracts X X X X X X X X Extracts X X X X ..... y in the textile mill, can we say that there was a enduring benefit to the assessee especially when the production activity remains as such. As rightly submitted by the assessee, the production capacity of the spinning mill would always depending upon the number of spindles installed in the spinning mill. In the case before us, no spindles were replaced. What was replaced is only blow room machinery, carding machine, draw frame, speed frame and compressor. Therefore, we can safely conclude that there was increase in production capacity of the spinning mill after the replacement of the above machinery. Merely because certain machineries were replaced, it could not automatically result in increase in production capacity. It has to be demon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g mill. In the course of its business activity, the assessee has replaced blow room machinery, draw frame, speed frame and compressor. According to the Ld. counsel, these are all parts of the machinery installed in the spinning mill and it cannot do any independent function in the spinning mill. The production capacity of the spinning mill after replacement remains the same. The spindular capacity does not increase. Referring to the order of the assessment, the Ld. counsel submitted that the Assessing Officer found that the machines replaced are latest model machines available in the market and there would be a functional production capacity atleast 25 to 30% more than the old machinery. According to the Ld. counsel, due to replacement of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Therefore the CIT (Appeals) is not justified in confirming the disallowance made by the Assessing Officer. 3. On the contrary, Shri Shiva Srinivas, the Ld. Departmental Representative submitted that the replacement of machinery creates a new asset of enduring in nature. Therefore, the expenditure incurred by the assessee has to be capitalized and at the best the assessee may claim depreciation as per the provisions of law. Referring to the judgment of the Apex court in CIT v. Saravana Spinning Mills (2007) 293 ITR 201, the Ld. D.R., submitted that the machinery / machine in the segment has to be considered as independent machinery since the same plays independent role. Therefore, replacement of machinery in the textile mill cannot be co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and perused the material available on record. The assessee admittedly incurred an expenditure of ₹2,30,93,720/- in replacement of blow room machinery, carding machinery, draw frame, speed frame and compressor. The Apex court while considering the case of the spinning mill in Saravana Spinning Mills (supra) found that the machineries in a segment of textile mill has an independent role to play. Therefore, it has to be construed as independent machinery. The question arises for consideration is when there was a replacement of certain machinery in the textile mill, can we say that there was a enduring benefit to the assessee especially when the production activity remains as such. As rightly submitted by the Ld. counsel for the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... course of manufacturing activity is one of the requirements, if the assessee intends to continue in the business. Therefore, this Tribunal is of the considered opinion that unless and until the production capacity was increased, the expenditure incurred by the assessee has to be allowed as current repair. A similar view was taken by the Madras High Court in M/s. Precot Meridian Ltd., (Tax case) Appeal Nos. 140 to 143 of 2013 dated 24.07.2013. In view of the above, we are unable to uphold the orders of the lower authorities. Therefore, the orders of the lower authorities are set aside and the addition made by the Assessing Officer to the extent of ₹2,30,93,720/- is deleted. 6. In the result, the appeal of the assessee stands allow ..... X X X X Extracts X X X X X X X X Extracts X X X X
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