/xcart/skin1/customer/main/subcategories.tpl
Try this after this line:
<h1>{$current_category.category}</h1>
add the following ......
<img src="{if $current_category.icon_url}{$current_category.icon _url}
{else}{$xcart_web_dir}/image.php?id={$cat}&type=C{/if}" alt="" />