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2016 (5) TMI 959 - ITAT DELHI

2016 (5) TMI 959 - ITAT DELHI - TMI - Treatment of expenditure - whether CIT (A) deleting addition made by the AO by capitalizing expenses on Furniture & Fixtures, machine Spares and Repair & Maintenance, which were claimed as revenue expenses by the assessee? - Held that:- It is well settled law that in deciding the enduring benefit of an expenditure the nature of business carried out by assessee assumes importance. In assessee’s case the firm was doing vacuum heat treatment for various parties .....

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damage due to the extreme temperature.

It was explained before ld. CIT(A) that the fixtures were mostly those items on which the products whose heat treatment were to be carried out were loaded and then both the fixture and the product were put inside the furnace. In such a situation ld. CIT(A) has rightly observed that fixtures would suffer major damage and, therefore, the assessee’s claim that they could be used only for 2-3 times, could not be brushed aside. Under such circumstanc .....

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chineries. Therefore, merely there being grouped under fixtures, it could not be concluded that they were capital in nature. All these facts noted by ld. CIT(A) have not been controverted by the department and, therefore, we do not find any reason to interfere with the findings of ld. CIT(A). Accordingly, order of ld. CIT(A) is upheld. - Decided in favour assessee. - ITA no. 3886/Del/2013 - Dated:- 13-4-2016 - SHRI S.V. MEHROTRA : ACCOUNTANT MEMBER AND SHRI SUDHANSHU SRIVASTAVA : JUDICIAL MEMBER .....

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7; 59,12,897/- by treating following expenses as capital in nature: - Furniture & fixtures - Machine spares - Repairs & maintenance 3. Ld. CIT(A) allowed the assessee s appeal. Being aggrieved, the assessee is in appeal before us and has taken following grounds of appeal: 1. On the facts and circumstances of the case and in law, the Ld. CIT (A) has erred in deleting addition of ₹ 59, 12,897/ - made by the AO by capitalizing expenses on Furniture & Fixtures, machine Spares and R .....

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hat, if these expenses were allowed as revenue expenses by the AO in the order u/s 143(3) for the AY 2008-09, then these should not have been added back in the AY 2009-10 also, ignoring the facts that in the AY 2008-09, the assessee did not-debit any expenses under the head 'Machine Spare. 4. The appellant craves leave to amend or alter all or any of the aforesaid grounds of appeal and amend, alter or add any other ground of appeal. 4. Brief facts apropos the additions made by AO are that as .....

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doing vaccum heat treatment for various parties all job work basis, the firm is pionners in the field of vaccum heat treatment, the nature of work consist of three type of heat treatment of die steel and aerospace components such as : 1. Vaccum heat treatment 2. Plasma ION Nitriding 3. Sub Zero Treatment etc. The process of head treatment is below :- 3. Stress relieving 4. Hardening 5. Tempering almost 3 times 6. Sub Zero on some of the products Fixtures The main fixtures required for the above .....

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ding condition and atmosphere quality. We have to use multiple fixtures for multiple designs. In this process we use to go heat upto 1200 degree centigrade in maximum time and for this reason we need stainless steel (55) fixture instead of mild steel (MS) fixtures, if we use mild steel at 1200 degree centigrade it can be melt or bend." In this process one fixture can be used for maximum 2 to 3 times and useful life of the same is less than a month, hence we have debited the same as revenue .....

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elating to spares of machinery into the revenue account. Repair and maintenance: The assessee had installed various type of machinery at the factory, the expenditure of machinery repairs consist of replacement of damage parts of an existing machinery which got damaged in the course of their working, minor repairs and maintenance of machinery is necessary to keep the machinery in working condition and due to this expenditure the assessee has neither acquired a new assets nor the value of exting a .....

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k or loose so they got unshaped and unusable, we have to change unusable graphite materials on regular basis for smooth running of furnace and maintain quality of products. We use to purchases block for holding graphite rod and both are used for heating elements and the same is fitted inside the hot zone box, we have to replace hot zone box within 9 to 10 months to maintain proper heat uniformity hence the firm has debited these expenses in their revenue account. " 5. The AO, however, did n .....

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the addition after considering the assessee s submissions in detail and the nature of activities carried out by assessee under which it could not be said that the impugned expenses resulted into any enduring benefit. He taking into consideration that the furnace was heated up to 1200 degree centigrade, observed that under such circumstances the fixture can be used for maximum 2-3 times only. 7. We have considered the submissions of both the parties and have perused the record of the case. It is .....

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