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2021 (12) TMI 54 - AT - Income TaxNature of expenditure - reconditioning/repair of plant and machinery - revenue or capital expenditure - HELD THAT:- As from the production chart available it is proved that machine was not operating state in April, 2010; that from the inspection and investment proposal note dated 02.03.2010 it is proved that there was a problem of “size variation” affecting the repair of the machine; that from the internal production report regarding WMB Internal Grinding machine which was giving problem due to size variation, proposal for overhauling the machine was put up and on the basis of which order was placed with Sharpline Automation for supply of CNC Control panel and to do various jobs at the cost of ₹ 36,35,125/- whereas for purchase of new similar machine of Euro equivalent was costing ₹ 2.98 crores as per quotations available that it was a business decision of the assessee that overhauling old machine for ₹ 36,35,125/- as against cost of new machine of ₹ 2.98 crores is a prudent business decision. In view of order passed by the coordinate Bench of the Tribunal in assessee’s own case for AYs 1995-96 to 1999-00 and following the decision rendered in case of Neyelli Lignite Corporation Ltd. [2016 (4) TMI 675 - MADRAS HIGH COURT], we are of the considered view that it was a case of merely overhauling machine by replacing its old parts as it was having problem due to size variation. Overhauling the old machine at less than of 1/6th of its price as a new unit i.e. for ₹ 36,35,125/- as against new unit for ₹ 2.98 crores is a prudent business decision and by overhauling the old machinery, no new asset has been created and as such, these are to be treated as revenue expenses - so long as only part of the machinery has been replaced as in the instant case to preserve and operate the existing machinery/assets without any enduring advantage, it would be treated as revenue expenditure - expenditure incurred by the assessee for reconditioning of plant and machinery are to be treated as revenue expenditure - Decided in favour of assessee.
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