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2016 (5) TMI 959 - AT - Income TaxTreatment of expenditure - whether CIT (A) deleting addition made by the AO by capitalizing expenses on Furniture & Fixtures, machine Spares and Repair & Maintenance, which were claimed as revenue expenses by the assessee? - Held that:- It is well settled law that in deciding the enduring benefit of an expenditure the nature of business carried out by assessee assumes importance. In assessee’s case the firm was doing vacuum heat treatment for various parties on job work basis. The nature of work consisted of 3 types of heat treatment of die steel and aerospace components, such as – (i) vacuum heat treatment; (ii) plasma ion nitriding; and (iii) sub zero treatment. From the assessee’s submissions, reproduced above, it is evident that heating of items in furnace was done at a temperature up to 1200ċ and also at sub zero temperature. The ld. CIT(A) has very rightly observed that it is obvious that the items loaded in the furnace can suffer major damage due to the extreme temperature. It was explained before ld. CIT(A) that the fixtures were mostly those items on which the products whose heat treatment were to be carried out were loaded and then both the fixture and the product were put inside the furnace. In such a situation ld. CIT(A) has rightly observed that fixtures would suffer major damage and, therefore, the assessee’s claim that they could be used only for 2-3 times, could not be brushed aside. Under such circumstances, merely because assessee had used not only stainless steel, but mild steels and graphite items, could not be a basis for concluding that fixtures would have a very long life, because the life of the item would depend upon the use to which it was put. Ld. CIT(A) has also pointed out that ten items of fixtures listed at page 3 of the assessment order, showed that these were mostly cables, pipes, thermocouple, MCB etc., which did not have any independent existence and would be a part of other machineries. Therefore, merely there being grouped under fixtures, it could not be concluded that they were capital in nature. All these facts noted by ld. CIT(A) have not been controverted by the department and, therefore, we do not find any reason to interfere with the findings of ld. CIT(A). Accordingly, order of ld. CIT(A) is upheld. - Decided in favour assessee.
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