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Section 37(1) of the Income-tax Act, 1961 - Business Expenditure - Allowability of Where there was no material available as to increase of production capacity on replacement of machineries, question whether expenditure on replacement of spinning machinery and cone winding machinery was allowable as revenue expenditure could not be decided and matter was to be remitted back to Commissioner (Appeals) to re-do exercise [Assessment year 2004-05] [Remanded] Vijayashree Spinning Mills (P.) Ltd. v. Asstt. CIT [2009] 314 ITR 212 (Mad.) Where there was no material available as to the increase or otherwise of the production capacity on replacement of the machineries, the question whether the expenditure on replacement of spinning machinery and cone winding machinery was allowable as revenue expenditure could not be decided and the matter was to be remitted back to the Commissioner (Appeals) to re-do the exercise with reference to the of the Supreme Court in the case of CIT v. Ramaraju Surgical Cotton Mills [2007] 294 ITR 328. S. Jayakumar for the Appellant. Ms. Pushya Sitaraman for the Respondent. JUDGMENT K. Raviraja Pandian, J.-The appeals are filed against the order of the Income-tax Appellate Tribunal, Madras "C" Bench, dated October 31, 2008, made in I.T.A. Nos. 256 and 257/Mds/2000, respectively. The relevant assessment years are 2003-04 and 2004-05. The substantial questions of law formulated for entertainment of the appeals are as follows: "1. Whether the Tribunal was right in holding that the expenditure on replacement of spinning machinery and cone winding machinery is not allowable as revenue expenditure? 2. Whether the Tribunal's order is perverse especially when the entire facts and circumstances have not been properly appreciated while coming to the conclusion that the expenditure in question is capital expenditure ? 3. Whether the Tribunal is right in not allowing the depreciation claim made by the appellant before the lower authorities without discussing the same in the impugned order, even though additional grounds appeal were raised before the Tribunal?" 2. The issue involved in this case is whether replacement of the machineries, particularly spindles…

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