TMI Blog2018 (1) TMI 451X X X X Extracts X X X X X X X X Extracts X X X X ..... ocess involved therein, the explanation to section 30 and 31 of the Act brought into the statute with effect from 1.4.2003 would not be applicable to the facts of the instant case. Expenses in the instant case would have to be treated only as revenue expenditure and we direct accordingly. Hence the Ground No.2 raised by the assessee is allowed. - I.T.A No. 823/Kol/2015 - - - Dated:- 5-1-2018 - Shri M.Balaganesh, AM And Shri S.S.Viswanethra Ravi, JM For The Appellant : Shri Kartik Kurmy, Advocate Shri S.B.Sharma, Advocate For The Respondent : Shri Soumyajit Dasgupta, Addl.CIT ORDER Per M.Balaganesh, AM 1. This appeal by the Assessee arises out of the order of the Learned Commissioner of Income Tax(Appeals)-1, Kolkata [in short the ld CIT(A)] in Appeal No.112/CIT(A)- 1/C-3/2013-14 dated 16.02.2015 against the order passed by the DCIT, Circle-3, Kolkata [ in short the ld AO] under section 143(3) of the Income Tax Act, 1961 (in short the Act ) dated 28.02.2013 for the Assessment Year 2010-11. 2. The only issue to be decided in this appeal is as to whether the ld CITA was justified in upholding the treatment of replacement of steel rolls as capita ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stant case are incurred wholly and exclusively for the purpose of business and earning profit and not for the purpose of expansion, increasing the production capacity or development improvement or for earning greater profit and also the said expenditures are not meant for any enduring benefit or advantage, hence, the said expenditure cannot be classified as Capital Expenditure by any process of reasoning. 4. We have heard the rival submissions. We find that the assessee had installed one Rolling Mill for manufacture of rolled products i.e Angles, Channels, Round Bar, Flat Bar, Square Bar, Octagonal Bar, Hexagonal Bar etc . In the rolling mill, the assessee uses Steel Rolls which is an integral part of the machinery. In the process of manufacture of rolled products, the raw materials (mild steel billets / mild steel ingots) are fed into the heating furnace where it is heated at the requisite temperature. The red hot raw materials (ingots and billets) are then passed through a series of rolling stands fitted with steel rolls which keeps rotating and exerts pressure on the hot raw material which elongates the stock to desired shapes and sizes for manufacture of desired rolled p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all throughout been claiming expenditure on replacement of rolls as revenue expenditure. Up to the assessment year 1991-92, the Department has allowed the same as deduction. In none of the earlier assessment years, the expenditure was treated as capital expenditure Now, the only issue before us is that the mere fact that the Appendix cited supra prescribe the rate of depreciation of rolls prior to September 3D, 1991, as 100 per cent. and thereafter at 50 per cent. would show that the Legislature had intended to treat the same as capital in nature. We are unable to accept the reasoning given by the Commissioner of Income-tax (Appeals) that if the intention of the Legislature was not to treat such expenditure as capital in nature, there was no necessity in providing the rate of depreciation on the rolls for the simple reason that expenditure incurred on rolls prior to the commencement of the business would be capital in nature. Therefore, it is necessary to provide the rate of depreciation on rolls so that depreciation at that rate could be allowed to the assessee. But it does not mean that expenditure incurred on replacement of rolls subsequent to the commencement of the business w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iture and not capital in nature. The assessee was entitled to claim deduction as current repairs. In this view of the matter, we set aside the orders of the Commissioner of Income-tax (Appeals) and direct the Assessing Officer to allow deduction on the replacement cost of rolls as current repairs. Accordingly, this ground of appeal is allowed for both the assessment years. In the result, both the appeals of the assessee are partly allowed. 4.2. We also find that the aforesaid decision of Chandigarh Tribunal had been approved by the Hon ble Punjab Haryana High Court in the case of CIT vs Malhotra Industrial Corporation reported in (2002) 254 ITR 635 (P H) . The questions raised before the Hon ble Court and the decision rendered thereon are as under:- In this appeal under section 260A of the Income-tax Act, 1961 ( the Act ), the revenue maintains that the following substantial question of law arises for the consideration of this Court : Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in treating the expenses incurred on the purchase of rolls as a revenue expenditure particularly when such rolls have been te ..... X X X X Extracts X X X X X X X X Extracts X X X X
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