# COMMISSIONER OF INCOME-TAX, MADRAS v. MAHALAKSHMI TEXTILE MILLS LTD

- **Citation:** [1967] 3 S.C.R. 957
- **Court:** Supreme Court of India
- **Decided:** 1967-05-05
- **Case number:** Civil Appeal No. 784 of 1966
- **Bench:** J. C. Shah, S. M. Sikri, V. R.Amaswami
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/commissioner-of-income-tax-madras-v-mahalakshmi-textile-mills-ltd-4078
- **Pages:** 4

## Headnote

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Indian Income-tax Act, 1922 (Act JI of 1922) s. 33-P/ea not raised
before department-If can be before Tribunal.
Expenditure on introducing the Casabalanca conversion system in the
spinning plant of the assessee was not allowed as "development rebate"
by the Income-tax Officer and the Appellate Commissioner, The Appellate Tribunal after inspecting the factory and considering the literature
an.I Gove,mment notifications, h,eld that the "xpenditu:re, though not
admissible as development rebate, was admissible as an allowance for
current repairs to the existing machinery under s. lO(i) XV
of
the
Income-tax Act.
The High Court, on reference, accepted the Tribunal's
finding and held that the Tribunal had jurisdiction to permit the asscssee
to raise a new contention which was not raised before the departmental
authorities. In appeal by the Commissioner. this Court,
HELD : The appeal must be dismissed.
Under sub-s. ( 4) of s. 33 of the Indian Income-tax Act, 1922. the
Appellate Tribunal is competent to pass such orders on the appeal "as
it thinks fit".
There js nothing in the Income-tax Act which restricts
the Tribunal to the determination of ouestions rais·~d before the departmental authorities. All questions whether of law or of fact which relate
to the assessment of the assessee may be raised before the Tribunal.
If
for rca.'i'ons recorded by the departmental authorities in rejecting a contention raised by the asscssee, grant of relief to him on another ground is
justified, it would be open to the departmental authorities and the Tribunal, and indeed they would be under a duty to grant that relief.
~ The
right of the asscssce to relief is no,t restricted to the plea raised by him.
[959D-Fl

## Text

A
COMMISSIONER OF INCOME-TAX, MADRAS
v
MAHALAKSHMI TEXTILE MILLS LTD.
May 5, 1967
B
[J. C. SHAH, S. M. SIKRI AND V. R.AMASWAMI, JJ.]
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Indian Income-tax Act, 1922 (Act JI of 1922) s. 33-P/ea not raised
before department-If can be before Tribunal.
Expenditure on introducing the Casabalanca conversion system in the
spinning plant of the assessee was not allowed as "development rebate"
by the Income-tax Officer and the Appellate Commissioner, The Appellate Tribunal after inspecting the factory and considering the literature
an.I Gove,mment notifications, h,eld that the "xpenditu:re, though not
admissible as development rebate, was admissible as an allowance for
current repairs to the existing machinery under s. lO(i) XV
of
the
Income-tax Act.
The High Court, on reference, accepted the Tribunal's
finding and held that the Tribunal had jurisdiction to permit the asscssee
to raise a new contention which was not raised before the departmental
authorities. In appeal by the Commissioner. this Court,
HELD : The appeal must be dismissed.
Under sub-s. ( 4) of s. 33 of the Indian Income-tax Act, 1922. the
Appellate Tribunal is competent to pass such orders on the appeal "as
it thinks fit".
There js nothing in the Income-tax Act which restricts
the Tribunal to the determination of ouestions rais·~d before the departmental authorities. All questions whether of law or of fact which relate
to the assessment of the assessee may be raised before the Tribunal.
If
for rca.'i'ons recorded by the departmental authorities in rejecting a contention raised by the asscssee, grant of relief to him on another ground is
justified, it would be open to the departmental authorities and the Tribunal, and indeed they would be under a duty to grant that relief.
~ The
right of the asscssce to relief is no,t restricted to the plea raised by him.
[959D-Fl
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 784 of
1966.
Appeal by special leave from the judgment and order dated
March 12, 1964 of the Madras High Court in Tax Case No. 157
of 1961.
D. Narsaraju and R. N. Sachthey, for the appellant.
R. Gopalakrishnan an<;_! N. Srinivasan, for the respondent.
The Judgment of the Court was delivered by
Shah, J.
The respondent-hereinafter called 'the assessee'-
carries on the business of manufacture and sale of cotton yam.
In the previous year relevant to the assessment year 1956-57.
the assessee spent Rs. 93,215/- for introduction of "Casablanca
conversion system" in its spinning plant.
Substantially this involved replacement of certain roller stands and fluted rollers fitted
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958
SUPREME COURT REPORTS
[1967) 3 S.C.R.
with rubber aprons to the spinning machinery, r~moval of ring.
frames from certain existing parts, introduction, inter a/ia, of ballbearing jockey-pulleys for converting the original band-drivers to
tape-drivers and other additions and alterations in the drafting
mechartism.
The Income-tax Officer disallowed the claim of the assessee
for Rs. 93,215/- because it was not admissible as "development
rebate" since the introduction of Casablanca conversion system
did not involve installation of "new machinery".
The Appellate
Assistant Commissioner agr.eed with the Income-tax Officer. In
appeal to the Appellate Tribunal, besides submitting the claim
that expenditure was allowable as development rebate, the assessee
urged that the amount laid out for introducing the Casablanca
conversion system was in any event expenditure allowable under
s. 10 ( 2) ( v) of the Indian Income-tax Act.
The Tribunal inspected the spinning factory of the assessee and studied the working of the machinery with the Casablanca conversion system in
the process of spinning yarn. They also considered the liierature
published by the manufacturers of Casablanca co_nversion system
and the relevant notification issued by the Ministry of Commerce,
Government of India, defining the import policy, and held that
as a result of "the stress and strain of production over a long
period" there was need for change in the plant and that the
assessee had replaced old parts by introducing the Casablanca
conversion system.
In the view of the Tribunal the expenditure
incurred for introducing the Casablanca conversion system,
though not admissible as development rebate, was admissible as
an allowance under s. 10(2) (v) of the Indian Income-tax Act.
The Tribunal then referred the following two questions to the
High Court of Judicature at Madras :
" ( 1) Whether on the facts and in the circumstances
of the case, the Tribunal had jurisdiction to decide
whether the sum of Rs. 93,215/- constituted an allowable item of expenditure under s. 10(2) (v) of the
Act?
(2) Whether on the facts and in the circumstances
of the case, the sum of Rs. 93,215/-
or any portion
thereof is allowable as an expenditure incurred for current repairs tinder s. 10(2) (v) of the Act?"
The High Court accepted the finding recorded by the Tribunal
that by the introduction of the Casablanca conversion system no
new machinery or plant was installed, but the introduction of the
sysiem- amounted :"to fitting of improved versions of certain minor
parts" and expenditure in that behalf was of revenue nature.
The High Court also held that the Tribunal had jurisdiction to
permit the assessee to raise a new contention which was not raised
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C.l,T. V, MAHALAKSHMI MILLS (Shah, J.)
959
before the departmental authorities. The Commissioner has
appealed to this Court, with special leave.
The Tribunal had evidence before it from which it could be
concluded that by introducing the Casablanca conversion system
the assessee made current repairs to the machinery and plant.
The High Court observed that certain moving parts of the machinery had because of "wea~ and tear" to be periodically replaced,
and when it was found that the old type of replacement parts
were not available in the market, the assessee introduced
the
Casablanca conversion system, but thereby there was merely replacement of certain parts which were a modified version of the
older parts. Counsel for the Commissioner has not challenged
these findings and the answer to the second question recorded in
the affirmative by the High Court must be accepted.
By the first question the jurisdiction of the Tribunal to allow
a plea inconsistent with the plea raised before the departmental
authorities is canvassed.
Under sub-s. ( 4) of s. 33 of the Indian
Income-tax Act, 1922, the Appellate Tribunal js competent to
pass such orders on the appeal "as it thinks fit". There is nothin~ in the Income-tax Act which restricts the Tribunal to the determination of questions raised before the departmental authorities.
All questions whether of law or of fact which rela.te to the assessment of the assessee may be raised before the Tribunal. If for
reasons recorded by the departmental authorities in rejecting a
contention raised by the assessee, grant of relief to him on another
ground is justified, it wol!ld be open to the departmental authorities and the Tribunal, and indeed they would be under a duty
to grant that relief.
The right of the assessee to relief is not
restricted to the plea raised oy him.
The Tribunal in the present case was of the opinion that in
order to adjust the liability of the assessee, it was necessary to
ascertain the true nature of the Casablanca conversion system.
The assessee had, it is true, contended that the introduction of
the Casablanca conversion system was of the nature of machinery
or plant which being new had been installed for the purpose of
business within the meaning of s. 10(2)(vi-b) of the Indian
Income-tax Act. The Tribunal rejected the claim of the assessee,
but on that account the Tribunal was not bound to disallow thi
claim of the assessee for allowance of the amount spent, if it wa!
a pennissible allowance on another ground.
The Tribunal on
investigation of the true nature of the alteratiO!!S made by the
introduction of the. Casablanca conversion system came to the
conclusion that it did not amount to installation of new machinery or plant, but it amounted in substance to current repairs to
the existing·mac)iinery.
960
SUPREME COURT REPORTS
[1967] 3 S.C.R.
The subject-matter of the appeal in the present case was the
right of the assessee to claim allowance for Rs. 93;215/-. Whether the allowance was admissible under one head or the other
of sub-s. (2) of s. 10, the subject-matter for the appeal remaiiied
the same, and the Tribunal having held that the expenditure incurred fell within the tenns of s. 10(2)(v), though not under
s. 10(2)(vi-b), it had jurisdiction to admit that expenditure as
a permissible allowance in the computation of the taxable income
of the assessee.
The High Court was, therefore, right in answering the first
question in the affinnative.
The appeal fails and is dismissed with costs.
Y.P.
Appeal dismissed.
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