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2019 (7) TMI 675

..... ed question is no longer res-integra in view of the judgement of this Court in the case of the very same assessee rendered [2019 (4) TMI 1723 - GUJARAT HIGH COURT] found that the expenditure claimed as revenue expenditure is in respect of components of the machinery which cannot be treated as the independent machinery in itself as they are not capable of functioning independently. It was further held that the chemical and fertilizer plant was very large plant within which again there are large machines and within the machine there are components requiring replacement due to wear and tear, that was different plants within the fertilizers and chemical plant. - Decided against revenue - R/TAX APPEAL NO. 181 of 2019 - 8-7-2019 - MR J. B. PARDIWALA AND MR A. C. RAO, JJ. For The Appellant (s) : MR. VARUN K. PATEL (3802) ORAL ORDER (PER : HONOURABLE MR.JUSTICE J.B.PARDIWALA) 1.00. This Tax Appeal under section 260(A) of the Income Tax, Act, 1961 (for short the Act, 1961) is at the instance of the revenue and directed against the order passed by the Income-tax Appellate Tribunal in ITA No.1060/Ahd/2015 dated 27/09/2018 for the year 2003-04. 2.00. The revenue has proposed the following ques .....

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..... t out any material on record to establish that the various parts of machine as described in earlier paragraph of this appeal order were independent machine giving enduring benefit to the appellant. The direction of Hon ble lTAT, Ahmedabad as given by it in ITA No. 1464/Ahd/2007 in the case of appellant was very clear. As per the Hon ble ITAT, Ahmedabad on perusal of assessment order in which it has been written that Rotor Assembly is a part of X-701 Turbine, was broken and was required to be replaced by new Rotor to run Turbine. As per the Hon ble ITAT, Ahmedabad its justification was given before the AO also. As per the Hon ble ITAT, Ahmedabad similarly, that the gas chrornatoqraph, the matter required examination whether the parts so replaced were independent machine or were parts which required to be fitted in place of broken parts of the Turbine. As per the Hon ble ITAT, Ahmedabad the clear findings were required to be given by the AO which were not available in the order of the AO. Considering these facts the Hon ble ITAT, Ahmedabad remanded the matter to the file of the AO with direction to examine the issue and decide the same de novo but by affording reasonable opportunity .....

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..... Nozzle Ring are not independent parts capable of functioning of independently. Considering all these facts, it is held that the expenditure incurred by the appellant on account of replacement of Turbine Rotor, Gear Shaft with Gear Part and Nozzle Ring are not capital expenditure as the same cannot be treated as independent machinery in itself and they are not capable of functioning independently. In view Of this, the A0 is directed to treat the expenditure incurred on these Turbine Rotor, Gear Shaft with GEAR Part and Nozzle Ring as revenue expenditure and accordingly allowed the same. 4.9. As regards another part i.e. 415V, 3000AMP, 3PH - 40W PMCC for CHP, the AO in his remand report has not given definite finding by bringing the materials on record. On the basis of report of the Inspectors, the A0 after discussing technical aspect of this part of machine in his remand report has finally stated that this part was not visible outside but looked like whole system and the whole system was looking renovated. As per the AO it was observed that the whole panel was replaced with new panel and it looked like an independent Unit capable of functioning independently viz. Coal Handling Plan .....

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..... IT came to be affirmed by the tribunal holding as under :- 9. We have heard the rival contentions and find that the issue is covered by the earlier orders of ITAT in ITA No.1363/Ahd/2013 dated 17.05.2018 for A.Y.2009-10 and earlier orders as mentioned in the order of Tribunal in para 13 to 17 which reads as under: 13. Brief facts of the case are that the assessee incurred expenses of consumption and replacement of stores and spares of ₹ 9,548.68 lakhs and claimed the same as revenue expenditure. However, out of that, the Assessing Officer (AO) has disallowed ₹ 3,00,96,651/- treating it as capital expenditure after allowing the depreciation of ₹ 45,14,498/- thereon. The AO has made disallowance of net amount ₹ 2,55,82,153/- on the ground that the items are in the nature of independent machine and average life span is 5 years or more and in one item life span is 20 years which suggests that these items can be used independently. 14. The assessee went in to appeal before the CIT(A). The CIT(A) after examining the facts of the case and items of machinery to replace component and relying on various case laws examined the explanation of the assessee and on the bas .....

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..... and Methanol were manufactured. Various plants and equipment were in continuous operation in corrosive and acidic atmosphere. It was found that no new assets were created in the process of replacement of worn out parts. There was no capacity addition. The replacement of components of old machinery was made to bring to its original state of efficiency so that the entire integrated manufacturing unit which was considered as a profit making apparatus functions efficiently to its capacity and produces quality products. The CIT (Appeals) after perusing the paper book which contains the details like name of the main plant or machinery to which the replaced component pertains, cost of replaced component, cost of total plant and past history of disallowance and appellate decision in past in respect of similar components and the facts which were explained with the help of diagram/process chart showing that replaced component is part of the main plant. The CIT (Appeals), therefore found from the details of additions to that the fixed assets that addition of independent machinery has already been capitalised and claim is made only for depreciation. Thereafter, the CIT (Appeals) on the above f .....

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