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Our Bureau

New Delhi , Aug. 30

THE Finance Minister, Mr P. Chidambaram, on Tuesday said in the Lok Sabha that the Income Tax Department would move the Supreme Court in appeal against the Madras High Court judgment on April 29, in the case of Commissioner of Income Tax vs Janakiraman Mills Ltd.

The Madras High Court had disposed of the appeal made by the Income Tax Department in this case along with a batch of cases that dealt with the same issue. In all, 43 textile mills were involved in the case before the Madras High Court.

"A few weeks ago, the Department had sent the papers to the Ministry of Law for filing an appeal to the Supreme Court and the appeals are being filed," Mr Chidambaram said in the Lok Sabha while giving an explanation on the matter relating to engaging Ms Nalini Chidambaram as special counsel of the Income Tax Department.

In his statement, Mr Chidambaram highlighted that certain remarks had been made through the media on the merits of the case.

Mr Chidambaram said that the case involved a pure question of law.

"Whether expenditure on replacement of machinery would be accounted as revenue expenditure or capital expenditure?"

The Finance Minister said that the question was decided by the Supreme Court as early as in 1967.

He said that the Department "seems to have decided to re-agitate the matter".

The Department lost the case before the Commissioner of Income Tax (Appeals), again before the Income Tax Appellate Tribunal (ITAT) and now before the Madras High Court.

He also said that the principle of law laid down in the case does not apply to textile mills alone, but to all companies and firms e.g. paper mills, steel mills, sugar mills etc that replace machinery.

The Finance Minister also said that the insinuation that one Sri Karpagambal Mills, Cholapuram was also a party to the case in issue was not correct.

"The insinuation is false. 43 mills were involved in the case before the Madras High Court and Sri Karpagambal Mills does not figure in the list of 43 mills. The CBDT has clarified this point also," Mr Chidambaram said.

The AIADMK Rajya Sabha MP, Mr N. Jothi, had alleged that one Mr Lakshmanan Chettiar, the eldest blood-brother of Mr Chidambaram, was running the Karpagambal Mills.

In a letter to the Rajya Sabha Chairman, Mr Bhairon Singh Shekhawat, the AIADMK Rajya Sabha MP sought a reply from the Finance Minister as to whether the Karpagambal Mills has got a similar issue pending with the Income Tax Department and the outcome in the said batch of cases squarely applies to Karpagambal Mills, so that the said mills also need not pay tax to the Department.

Reiterating the explanation given on the matter in the Rajya Sabha on Monday, the Finance Minister told the Lok Sabha that the he had no knowledge of the matter at any stage during the relevant period.

"I believe that none of my respected colleagues in the House would seriously think that had the matter been brought to my notice, I would have allowed it to proceed an inch further," he said.

"Let me make it clear, categorically and respectfully that had the matter been brought to my notice at any time earlier, I would have ensured that the proposal to engage Ms Nalini Chidambaram was nipped in the bud and not processed any further," Mr Chidambaram told the Lok Sabha.

The National Democratic Alliance (NDA) MPs walked out of the Lok Sabha after rejecting the explanation made by the Finance Minister.

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