Commissioner of Income Tax vs Sankar Spinning Mills (P) Ltd.

N.V. Balasubramanian, J.—Pursuant to the directions of this Court in TCP No. 294 of 1996, by order dt. 31st March, 1997, the Tribunal

(hereinafter referred to ''the Tribunal'') has stated a case and referred the following questions of law for our consideration :

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

during the accounting year on the cost of LMW spinning frame (Rs. 9,27,884) and LMW high speed draw frames (Rs. 2,14,758) was amount

paid on current repairs and allowable u/s 31 of the IT Act ?

Whether, the Tribunal is right in ignoring the statutory scheme and provisions of Section 32 of the IT Act and directing allowance of the amount

of Rs. 12,11,097 as revenue expenditure ?

Whether, on the facts and in the circumstances of the case, the Tribunal is correct in law in holding that the assesses is entitled to deduction of

the amount representing the employer''s contribution to provident fund and family provident fund even though the payment was not made within the

time specified in second proviso to Section 43B r/w Explanation below Clause (va) of Sub-section (1) of Section 36 ?

Insofar as the first two questions are concerned, they relate to the claim of the assessee as deduction under the head ''business'' on the

expenditure incurred by the assessee in the purchase of LMW spinning frame and LMW high speed draw frames either as current repairs or

revenue expenditure. The case of the assessee was it purchased machinery as a part of modernisation programme and, therefore, the amount

should be allowed either as current repairs or revenue expenditure. The AO disallowed the claim of the assessee which was confirmed by the

CIT(A), on appeal. The Tribunal held that the expenditure was incurred for the modernisation of the mill and no new mill was established by

incurring the expenditure. The Tribunal, therefore, held that the expenditure would be revenue in nature and allowed the claim of the assessee.

We have considered the similar issue that arises in the question Nos. 1 and 2 in Thanjavur Textiles Ltd. in TC No. 55 of 1998 and by judgment

of even date in T.C. No. 55 of 1998, we have remitted the matter to the Tribunal to consider the questions afresh. Both the counsel also agree that

the matter may be remitted back to the Tribunal to consider and decide the issues covered in the first two questions de novo. Accordingly,

following our judgment of even date in TC No. 55 of 1998, we remit the matter to the Tribunal and the Tribunal is directed to consider the issues

that arise in question Nos. 1 and 2 afresh, in accordance with law.

Insofar as third question is concerned, Mrs. Pushya Sitharaman, learned senior standing counsel for the Revenue fairly submitted that the

question has to be answered against the Revenue in view of an earlier decision rendered by this Court wherein this Court has considered a similar

issue and held that the assessee would be entitled to the deduction of the amount representing the employer''s contribution to provident fund and

family provident fund, even though the payment was made after the end of the accounting year, but within the grace period/Accordingly, we

answer the third question of law referred to us in the affirmative, in favour of the assessee and against the Revenue.

In the result, we are not answering the question Nos. 1 and 2, but the Tribunal is directed to consider and decide the question Nos. 1 and 2

afresh in accordance with law. Insofar as the third question is concerned, it is answered in the affirmative, in favour of the assessee and against the

Revenue. No costs.