Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2017 (2) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2017 (2) TMI 1447 - AT - Income TaxDisallowance on account of replacement of machineries and parts of the machineries - current repairs - HELD THAT:- Assessee admittedly incurred an expenditure in replacement of blow room machinery, carding machinery, draw frame, speed frame and compressor. The Apex court while considering the case of the spinning mill in Saravana Spinning Mills [2007 (8) TMI 16 - SUPREME COURT] found that the machineries in a segment of textile mill has an independent role to play. Therefore, it has to be construed as independent machinery. The question arises for consideration is when there was a replacement of certain machinery in the textile mill, can we say that there was a enduring benefit to the assessee especially when the production activity remains as such. As rightly submitted by the assessee, the production capacity of the spinning mill would always depending upon the number of spindles installed in the spinning mill. In the case before us, no spindles were replaced. What was replaced is only blow room machinery, carding machine, draw frame, speed frame and compressor. Therefore, we can safely conclude that there was increase in production capacity of the spinning mill after the replacement of the above machinery. Merely because certain machineries were replaced, it could not automatically result in increase in production capacity. It has to be demonstrated that due to change of machinery or replacement of machinery, the production capacity in fact actually increased. Merely because there was efficiency in running the machinery, this Tribunal is of the considered opinion that alone cannot be a reason to disallow the claim of the assessee. Unless and until, the assessee replaces the machinery, it may not be able to run the spinning mill at all. Maintenance of machinery in the course of manufacturing activity is one of the requirements, if the assessee intends to continue in the business. Therefore, this Tribunal is of the considered opinion that unless and until the production capacity was increased, the expenditure incurred by the assessee has to be allowed as current repair. Decided in favour of assessee
|