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294 ITR 328 [2008] 166 TAXMAN 356 (SC) SUPREME COURT OF INDIA Commissioner of Income-tax * v. Ramaraju Surgical Cotton Mills S.H. KAPADIA AND B. SUDERSHAN REDDY, JJ. CIVIL APPEAL NOS. 7593 TO 7595, 7600 TO 7602 OF 2005 AUGUST 21, 2007 Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of - Assessee claimed deduction under section 37(1) in respect of expenditure incurred on replacement of assets - Revenue's case was that assessee was not entitled to claim replacement expenditure as revenue expenditure as it was not incurred to replace an old worn out item of machinery; that on contrary old machine had been replaced by a new machine which constitute an advantage of an enduring nature and, therefore, expenditure was capital in nature - However, according to assessee said test propounded on behalf of Department is no more applicable - Whether in absence of requisite details regarding production capacity remaining constant even after replacement, matter was to be remitted to Commissioner (Appeals) - Held, yes CASE REVIEW Judgment of Madras High Court in CIT v. Janakiram Mills Ltd. [2005] 275 ITR 403 reversed. CASES REFERRED TO CIT v. Janakiram Mills Ltd. [2005] 275 ITR 403/ 146 Taxman 40 (Mad.) [Para 1] and CIT v. Saravana Spinning Mills (P.) Ltd. [2007] 293 ITR 201 / 163 Taxman 201 (SC) [Para 2]. Vikas Singh, Ms. A. Deb Kumar and B.V. Balram Das for the Appellant. S. Ganesh and Ms. Radha Rangaswamifor the Respondent. ORDER In C.A. No. 7594 of 2005 : 1. This civil appeal is filed by the Department against the dated 29-4-2005 in Tax Cases Reference Nos. 144, 408 and 409 of 1999 and 70 of 2000 etc., in the case of CIT v. Janakiram Mills Ltd. [2005] 275 ITR 4031 (Mad.), which also covers the case of the assessee-respondent herein. 2. At the outset it may be stated that vide the dated 10-8-2007, in Civil Appeal Nos. 7604-05, etc., of 2005 in the case of CIT v. Saravana Spinning Mills (P.) Ltd. [2007] 293 ITR 201 2 this Court has set aside the impugned herein of the Madras High Court in the case of Janakiram Mills Ltd. ( supra), principally on the ground that section 31 and section 37 of the Income-tax Act, 1961, operate in different spheres…

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