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2020 (2) TMI 921 - AT - Income TaxNature of expenditure - current repairs - Disallowance of expenditure towards cost of machinery - second round of litigation - HELD THAT:- The expenditure incurred for acquiring or replacing any machinery to run a factory or mill should be treated as capital expenditure in view of the decision in the case of Sri Mangayarkarasi Mills P. Ltd. [2009 (7) TMI 17 - SUPREME COURT] wherein salient findings are summarised as under: Placing reliance on the decision of Supreme Court in the case of Saravana Spinning Mills P. Ltd. [ 2007 (8) TMI 16 - SUPREME COURT] it held that each machine in a textile mill has an independent role to play in the mill and each machine is part of the integrated process of manufacture of yarn and is integrally connected to the other machines in the mill. However, this interconnection does not take away the independent identity and distinct function of each machine. Replacement of the machine can at best amount to a repair made to the process of manufacture of yarn. Each machine in a textile mill should be treated independently and not as a mere part of an entire composite machinery of the spinning mill. Replacement of an old machine with a new one would constitute the bringing into existence of a new asset in place of the old one and not repair of the old and existing machine. It therefore cannot amount to current repairs. Expenditure incurred by the assessee was capital in nature as it amounted to enduring advantage for the business in the form of efficient production over a period of time. Though accounting practices may not be the best guide in determining the nature of expenditure, they are indicative in nature. We sustain the addition confirmed by the ld. CIT(A) for the assessment year 2001-02. - Decided against assessee
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