TMI Blog2011 (6) TMI 761X X X X Extracts X X X X X X X X Extracts X X X X ..... the amount spent on current repair of the power plant taken on lease during the year. The action of ld. AO not allowing the same is totally unlawful, unjustified and unreasonable. The CIT(A) has also erred in law and on facts in stating that the said expenditure is not allowable u/s 35D of the Act when it was at no stage claimed that the amount spent is covered u/s 35D of the Act. The same deserves to be allowed. 2. The business of the assessee is manufacturing of steel fasteners, nuts and bolts. It filed its return of income on 8.12.2006 showing a loss of ₹ 19,84,792/- and book profit u/s 115JB at ₹ 7,36,458/-. During the course of hearing the AO observed that assessee had debited a sum of ₹ 31,54,844/- in the computation of income as deferred revenue expenditure. 10% of the said amount was debited to Profit Loss account on the ground that those are deferred revenue expenditure. The assessee was required to explain the allowability of the said expenditure in its entirety. It was submitted that the amount spent is of revenue in nature as the same has been incurred on repair of plant taken on lease and not owned by the assessee. The AO rejected such contenti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f order of ld. CIT(A). Alternatively it is the case of the assessee that depreciation of 10% should be allowed on it, in case main ground of the assessee is not accepted. Ld. CIT(A) has upheld the treatment given by the AO by holding that the expenditure incurred by the assessee are capital in nature. 4. The submissions made before AO and CIT(A) were reiterated before us by the ld. AR who has also filed before us synopsis of his arguments. In the synopsis apart from reiterating the submissions made before AO and CIT(A), it is the case of ld. AR that the case law relied upon by ld. CIT(A) to hold that the expenditure are capital in nature has no application to the facts of the case of the assessee. In addition he has submitted that in all subsequent years the expenditure incurred have been allowed by the revenue and he has produced before us a chart thereof which is annexed to synopsis as Annexure 1 and read as under: - IMPERIAL FASTNERS PRIVATE LIMITED, DELHI COMPARATIVE CHART OF EXPENSES FOR THREE YEARS ON REPAIRS MAINTENANCE OF KATHARA PLANT FOR THREE YEARS Assessment Year Repairs Maintenance (Rs.Lakhs) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pune-411028 10.03.06 8408 Mechanical Parts Replacement 143,899.60 6. Advant Automation Solutions Private Limited, 11/124, Indira Nagar, Lucknow (U.P) 13.03.06 0139 Hot Well Level Switch Hot Well Replacement 107,640 7. R.K. Automobiles (P) Ltd., 2620/3, Hamilton Road Kashmere Gate, Delhi-6. 16.03.06 1245 Valves Bearings Oil Seals etc. Replacement 208,000 8. Anil Rubber Mills (P) Ltd., Plot no. 30, Sector-6, Faridabad 121006 25.03.06 146 Conveyor Belt Replacement 750,031 9. Dhanbad Electro Power Meters, 28, Binod Market, (Near Court More), Hirapur, Dhanbad 860002 31.01.06 06 Electric Meter Replacement 109,695 TOTAL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure incurred by the assessee is revenue. From the details it can be seen that none of the expenditure has created any item of capital asset. It is in the nature of lubricating oil, replacement of steel hammer, turbine fluid for movement of turbine, lead acid stationery cell batteries which have been replaced, mechanical parts which have been replaced and other items of replacement like hot well level, valves bearings oil seals, conveyor belt and electrical meters. If assessee has to bring the plant in working order and to run it, these expenditure are necessary in regular course and they represents day to day expenditure either in the nature of current repair or in respect of wear and tear of the plant and machinery. Therefore, none of these expenditures have created any capital asset to the assessee and they are not in the nature of capital expenditure. 9. Now, it is the case of the ld. CIT(A) that assessee has entered into an agreement to run that plant on 14th October, 2005, whereas even prior to that expenditure have been incurred on 6th August, 2005 and 23rd September, 2005. It is the case of the assessee that it was under negotiations to run that plant and, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alternations of the building, station or additional machinery that may be brought by the lessor at the station and on such determination the schedule station shall rest in and be the absolute property of the lesser. Thus, this clause conveys that what the assessee is entitled is only written down value of the additions and alternations to the building, station or additional machinery. The aforementioned detail will reveal that none of the item represents addition or alternation to the building, station or additional machinery. Therefore, the amount of expenditure incurred by the assessee cannot be said to be giving any enduring benefit to the assessee. It has not created any capital asset for the assessee. Therefore, keeping in view the terms of agreement and facts of the case, it cannot be said that the expenditure incurred by the assessee has given at any enduring benefit. 11. As per well settled law, the way in which the entries are made by an assessee in its books of account is not determinative of the question that whether the assessee has earned any profit or suffered any loss. The assessee may, make entries which are not in conformity with the proper accountancy princi ..... 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