TMI Blog2020 (2) TMI 1285X X X X Extracts X X X X X X X X Extracts X X X X ..... of Banco ( [2018 (1) TMI 1309 - GUJARAT HIGH COURT ) and Sunbeam ( 2012 (6) TMI 59 - DELHI HIGH COURT ) and we propose to follow the ratio of both the decisions. - Decided in favour of assessee. - R/TAX APPEAL NO. 307 of 2008 - - - Dated:- 11-2-2020 - MR. J.B. PARDIWALA AND MR. BHARGAV D. KARIA JJ. Appearance: Mr. Tushar P. Hemani With Ms. Aditi Sheth Advocates (2790) for the Appellant(s) No. 1 Mr. Varun K. Patel(3802) for the Opponent(s) No. 1 ORAL ORDER (PER : MR. J.B.PARDIWALA) 1. This Tax Appeal under Section 260A of the Income Tax Act, 1961 [for short, 'the Act, 1961'] is at the instance of the assessee and is directed against the order passed by the Income Tax Appellate Tribunal, Ahmedabad Bench 'D', Ahmedabad dated 9th February 2007 in the ITA No.1967/Ahd/2001 for the A.Y. 1997 98. 2. This Tax Appeal came to be admitted on the following two substantial questions of law: [i] Whether, in the facts and circumstances of the case, the Income Tax Appellate Tribunal was right in law in not allowing the claim of bad debt when the assessee has admittedly written off the debt in its books of accounts? [ii ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further pleaded that since by repairing the plant and machinery, no new asset has come into existence, the treatment given by the assessing officer is not correct. To support his arguments he quoted before me the following decisions: 1. CIT vs. Grand Hotel 189 ITR 153 154 (All.) 2. CIT vs. Southern Publications Ltd. 211 ITR 397 (Mad) 3. C.R. Corera and Brothers vs. CIT 49 ITR 188, 195 (Mad) 4. Hanuman Motor Service vs. CIT 66 ITR 88 (Mysore) 5. CIT vs. Coimbatore Motor Transport Society 70 ITR 165 In all the above decisions, the issue has been decided on identical facts in favour of the assessee. He, therefore, pleaded that the ld. Assessing officer was not justified in disallowing the repair expenses treating the same as of capital nature and the addition made in this regard should be deleted. 7.1 After hearing the appellant's counsel and after going through the material on record, I am inclined to accept the argument of the appellant's counsel that since the repairs have been carried out in order to replace the damaged parts of the plant and machinery and since no new asset has come into existence, the addition made by treati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been created by the assessee, the expenditure incurred could be said to be towards the revenue expenditure. The argument proceeds on the footing that as the machine was damaged, it had to be repaired. In such circumstances, it could not be said that the object of the assessee in incurring expenses in repairing the machine was with a view to bringing a new asset into existence. 9. In such circumstances referred to above, the learned counsel would submit that the CIT(A) was right in holding that the expenditure incurred for the repairs of the machine was in the nature of revenue expenditure and such finding of fact could not have been disturbed. 10. Ms. Sheth, in support of her submissions, has placed strong reliance on two decisions of this High Court: (1) Gobind Glass Industries Ltd vs. DCIT [Tax Appeal No.12 of 2002 decided on 21 st November 2014] and (2) Additional Commissioner of Income Tax vs. Desai Brothers [1977] 108 ITR 14 (Guj). 11. On the other hand, Mr. Varun Patel, the learned counsel standing counsel appearing for the Revenue, while opposing this appeal, vehemently submitted that no error, not to speak of any error of law could be said to hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... much as it is incurred for the creation of an advantage of an enduring benefit and forms part of the assets of the undertaking, and the assessee was, therefore, entitled to development rebate under section 10(2)(vib) of the Indian Income- tax Act, 1922, on the cost of diesel engine. The Andhra Pradesh High Court has followed the decision of the Supreme Court in Commissioner of Income- tax v. Mir Mohammad Ali [1964] 53 ITR 165 (SC) and held that not only diesel engines have been held to be machinery but also the expression installations would include and apply when machinery is inducted or introduced. This decision of the Andhra Pradesh High Court, therefore, for the same reasons on which we have held about the non application of the decision of the Supreme Court in Mir Mohammad Ali s case [1964] 53 ITR 165 (SC) would not be of any assistance to the revenue. 15. Mr. Kaji, therefore, attempted to persuade us that this was a case of substantial replacement and, therefore, would not come within the terms of section 31(1) where only expenses incurred in connection with current repairs can be allowed as deduction. In New Shorrock Spinning and Manufacturing Co. Ltd. v. Commiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said case also emphasised the question as to when a building, machinery, plant or furniture requires repairs and when the need arises that question must be decided not by any academic or theoretical test but must be decided by the test of commercial expediency. It cannot be said, therefore, that when the assessee replaced the unserviceable petrol engine with a diesel engine it was intending to bring into existence either a new asset or to achieve advantage or benefit to itself for permanent endurance, nor can it be said that it was substantially replacing the machinery. It is no doubt true that there was no material on the record before the Tribunal as to what would be the price or cost of a new truck. But, none the less, the assessee could not have been able to purchase a new truck from the amount which it spent in replacement. This very question arose before the Mysore High Court in Hanuman Motor Service v. Commissioner of Income- tax [1966] 67 ITR 88 (Mys), where a transport operator claimed the expenses incurred by him in replacement of a petrol engine with diesel engine as current repairs under section 10(2)(v). The court held in that case that what was really being done wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... traints and are oftenly replaced during the year as a matter of stores and spares. Placing these facts before me, the ld. Counsel for the appellant pleaded that since these dies are very often replaceable items and are being replaced from year to year, the same amount to revenue expenditure. To support his argument he quoted before me, the following decisions: 1. CIT vs. Mysore Spun Concrete P. Ltd 194 ITR 159 (Kar.) 2. CIT vs. Lake Palace Hotel 227 ITR 561 (Raj.) In these decisions, on identical facts, the issue has been decided in favour of the assessee. He, therefore, pleaded that the ld. Assessing officer was not justified in making addition of these dies treating the same as of capital nature and the addition made should be deleted. 10.1 After hearing the appellant's counsel and after going through the material on record, I am convinced with his arguments that since the expenses incurred on these dies is for the replacement of the damaged dies, the same amounts to the revenue expenditure. Taking this plea into consideration and also following the decisions of Karnataka as well as Rajasthan High Courts (Supra), I hold that the addition made is not ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion Ltd in ITA No.119/Ahd/1991 dated 6 th December 1995 is misconceived. It is pointed out that the decision in the Gujarat Alluminium (supra) was rendered for the A.Y. 1986 87 when the patterns, dies and templates were mentioned under the machinery and plant in the Old Appendix I (applicable for the assessment years 1984 85 to 1987 88) in part III (ii)D(10). It is further pointed out that in the old Appendix I (applicable for the assessment year 1988 89 to 200203) which is applicable in the present case, the dies find no mention. In such circumstances, it is submitted that the finding of the Assessing Officer that dies form a part of Appendix I is not correct. 19. In support of the aforesaid submissions, Ms. Sheth has placed reliance on the following decisions: [1] Principal Commissioner of Income -tax, Central, Surat vs. Banco Aluminium Ltd [2018] 93 taxmann.com 52 (Gujarat) [2] Commissioner of Income- tax vs., Sunbeam Auto Ltd [2018] 89 taxmann.com 191 (Delhi). 20. Mr. Varun Patel, the learned standing counsel appearing for the Revenue would submit that no error, not to speak of any error of law could be said to have been committed by the Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to any question of law, much less, a substantial question of law warranting interference. The appeal, therefore, fails and is accordingly dismissed. 24. In Sunbeam (supra), the Delhi High Court held as under: 6. We do not think that any substantial question of law on this aspect/issue arises from the decision of the Tribunal. It has been factually found and that too concurrently by the CIT (Appeals) and the Tribunal that the purchase of dies and moulds did not bring into existence any permanent or enduring advantage to the assessee. It has been found that due to continuous use they wear out fast and further any minor defect in the mould on account of continuous use such as chipping or cracking would render them useless. In any case the longevity of the moulds and dies is not substantial as held by the Tribunal and they have to be replaced frequently to ensure quality of the product. Moreover, the moulds have to be produced to suit the requirements of the particular customer and after the order is met, they become useless and ultimately have to be destroyed to prevent misuse or manufacture of fakes. It has also been found by the appellate authorities that the expendit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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