9911796707
TMI Blog2018 (1) TMI 451X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 (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 capital expenditure as against revenue expenditure claimed by the assessee, in the facts and circumstances of the case. The ld AR during the course of hearing stated that he would press only Ground No. 2 which is the effective ground for adjudication of the dispute and other grounds are merely argumentative in nature and hence the same are not pressed. Accordingly, the Ground Nos. 3 to 12 raised by the assessee are dismissed as not pressed. 3. The brief facts of this issue is that the assessee is engaged in the activiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wing depreciation of Rs. 54,29,808/- , made net disallowance of Rs. 41,39,298/- (9569106-5429808) as capital expenditure in the assessment. This action of the ld AO was upheld by the ld CITA. Aggrieved, the assessee is in appeal before us on the following ground:- 2. The Appellant most humbly submits that expenditure in the "Steel Rolls" in the instant 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 r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce there is no enduring benefit or advantage derived by the assessee company in this regard. The replacement of steel rolls are merely operational expenses incurred in the ordinary course of business by the assessee. Moreover, from the details of replacement of steel rolls as tabulated hereinabove, it could be safely concluded that the steel rolls were replaced by the assessee on a regular basis and hence we hold that merely because the same is found as a separate line item in the Appendix I of Depreciation Rates Schedule, it does not take the character of capital expenditure automatically. We hold that since it is not a capital expenditure at all vis a vis the facts of the instant case and the manufacturing process involved therein, the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 would also be a capital expenditure. The judgment of the Karnataka High Court in the case of Mysore Spun Concre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TR 556, the Delhi High Court has held that the expenditure on replacement of damaged moulds was revenue expenditure. In the case of Co-operative Sugars Ltd. [1999] 235 ITR 343, the Kerala High Court has held that expenditure on "machinery maintenance" of sugar plant by replacing substantial part of the plant was revenue expenditure as no new asset was brought into existence. Even the jurisdictional High Court of Punjab and Haryana, in the case of Khalsa Nirbhai Transport Co. (P.) Ltd. [1971] 82 ITR 741, has held that the expenditure incurred replacement of petrol engines by diesel engines in its buses was a revenue expenditure. In the light of the legal position discussed above, we hold that the expenditure incurred replacement of damaged r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion claimed by the assessee as the revenue expenditure. 3. The assessee is running a steel rolling mill. In para 4 of the petition of appeal, it has been admitted that 'in the absence of rolls, it is difficult to prepare the finished products in the case under reference'. Yet the revenue alleges that the rolls cannot be treated as an integral part of that machinery or plant. 4. The Tribunal has found as a fact that 'the nature of the assessee's business is such that it requires frequent replacement of rolls. The expenditure incurred thereon would certainly fall in the nature of current repairs, as the same does not result in creating of capital asset or benefit of enduring nature'. 5. We find that in the circumstances of the case, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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