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2020 (9) TMI 917 - AT - Income TaxLoss of precious metal - Notional loss or actual loss - replenishing the loss in precious metal on account of wear and tear - HELD THAT:- There is no doubt that assessee has entered into lease agreement with its parent company for utilisation of their specialised machineries and reimburse the actual loss due to wear and tear. During this assessment year assessee has already quantified and reimburse the same. During this year as submitted by the assessee due to abnormal circumstances assessee has to replace feeder/nozzles due to frequent leakages in the feeder. These are all abnormal and special circumstances in which utilisation of metal has increased abnormally during this assessment year when compared to previous assessment year, however when we compare the loss in the subsequent assessment year, it does not look abnormal. We do not have any record of subsequent assessment year to appreciate the loss incurred by the assessee. Considering the abnormal situation existed during this year, in our considered view, the loss of precious metal during this year is abnormal. The abnormal utilisation of precious metal, however big, it is utilised as machinery consumables only, it does not or will not increase the life of the machinery. Abnormal loss incurred by the assessee can be treated as revenue expenditure to be allowable during this year or the abnormal loss can be amortised in 2 to 3 years. In our considered view no doubt the losses considerably high, we direct assessing officer to amortise the abnormal loss in 2 years that is 50% during this assessment year and balance in the next assessment year. With regard to observation of the assessing officer that assessee has purchased from the vendor and the documentation does not show that it is refurbished the machineries. We observe from the certificate issued by technical engineers from the company that assessee has purchased these precious metals and the internal technical department has carried out the respective work of re-fabrication of damaged feeders/nozzles. Therefore, we do not notice anything wrong in purchasing of the precious metals and carrying on repair work of the machineries internally by the assessee. Accordingly ground No. 2 raised by the assessee is partly allowed. Substantial repair of the internal road inside the factory - AO disallowed the above expenditure with the observation that assessee has not carried out repairs to the road at its factory but it is a case of complete construction of new road right from dismantling the existing road, excavation of entire road up to depth of 1.5 m and filling the excavated area by soil, placing a layer of plain cement concrete et cetera with top layer with RCC. This nature of work does not constitute petty repairs - HELD THAT:- Laying of new road and construction/finishing surrounding work results in benefit of enduring nature to the assessee. Accordingly, he treated the above expenses as capital expenses. Considering the substantial amount of expenses incurred to re-lay the road and it will certainly give enduring benefit to the assessee and we are in agreement with the findings of assessing officer that it is capital expenses. Since he treated the expenses as capital in nature incurred for the purpose of smooth functioning of the business, therefore these expenses were incurred for the purpose of business only. In our considered view, assessee is eligible to claim depreciation on the cost of construction of Road. Therefore, we are directing the assessing officer to allow the depreciation on the expenditure incurred to construct the road. Accordingly, ground raised by the assessee is partly allowed.
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