TMI Blog2021 (7) TMI 801X X X X Extracts X X X X X X X X Extracts X X X X ..... TMI 522 - MADRAS HIGH COURT] has already held; after considering all relevant case laws, that such dyes come under revenue head of expenditure than capital only. We therefore see no reason to interfere with the CIT(A) s findings having correctly appreciated relevant facts / law. - Decided against revenue. - I.T.A. No. 968/Hyd./2017, I.T.A. No. 1374/Hyd./2017, I.T.A. No. 483/Hyd./2019, I.T.A. No. 678/Hyd./2019 - - - Dated:- 16-7-2021 - Shri S.S. Godara, Judicial Member And Shri L.P. Sahu, Accountant Member For the Assessee : Sri Y. Ratnakar, A.R For the Revenue : Smt. N. Esther, D.R. ORDER PER S.S. GODARA, J.M. These four Revenue s appeals for AYs 2012-13 to 2014-15 and 2016-17 arise against the CIT(A)-7, Hyderabad s order dated 27.10.2016 in case no. 262/16-17; CIT(A)-2, Hyderabad s order dated 30.05.2017 in case no. 83/16-17 ; CIT(A)-12, Hyderabad s order dated 25.01.2019 in case no. 10221/15-16 , CIT(A)-2, Hyderabad s order dated 21.02.2019 in case no. 10327/16-17 ; respectively involving proceedings u/s 143(3) of the Income Tax Act, 1961 [the Act for short]. Heard both the parties. Case files perused. 2. It transpires at the out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the single user, otherwise waste for the industry. However this is being compensated in the selling price. If any stock of unbroken dies lying may be used for future production and resulting in cost saving or may not be used becoming a dead inventory. Again vide letter dated 26.3.2015, the AR has submitted that: 'Note on valuation of closing stock We would like to inform your goodself that the closing stock quantity held is of Die steel. We are enclosing herewith a statement showing stock movement of die steel for your verification. For support of our stock movement, statement we are enclosing herewith dies account which is debited with cost of die steel purchased and cost of job work charges for conversion of die steel into dies. To justify the same copies of bills for die steel purchases and job worker charges are also enclosed herewith for your verification. Thus from stock movement statement your goodself can verify the closing quantity held of die steel and detailed statement of closing stock of die steel has already been produced to your goodself. Note on consumption of dies: The dies received from job workers will be used f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sumed during the year itself which cannot be the correct proposition as it cannot be said that the life of die is only of a few months and even the dies which are getting made in the last month of the year can be treated to be entirely consumed. The assessee has neither taken any closing stock of the dies which have been available to it as opening stock and the quantity/amount got made during the year and those which were worn out during the year. If the assessee claims that dies are to be treated as part of plant and machinery then also he should have increased the value of plant and machinery to that extent and claimed depreciation on the same. 4.3. Reference may also be made to the old and new depreciation schedules as per Income Tax Rules also shows that the depreciation on Rubber and plastic goods factories - moulds is specified at 400/0. This shows the intention of the legislature that such dies and moulds are to be treated as plant and machinery and depreciation is being allowed to take care of wear and tear of the same. Higher rate of 40% has been specified in the depreciation rules for moulds which are for rubber and plastic goods factories, apparently on account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... die ranges upto 10 tons of production The production of 10 MTs for the appellant is less than a day s job. Many times die has to be scraped much before 10 MTs because the die breaks or the edges are cut or worn out of the die changes shape. In such a case, the die becomes useless and has to be changed. This can occur at the stage of production that is even at one ton or two tons. Its life is much less than one year. This is the reason why throughout the world a die is classified as 'consumables' and does not come under plant and machinery. 4. The appellant has installed plant and machinery to manufacture aluminium profiles. In order to manufacture the profile of the required size and shape, the die made is fixed into aluminium extrusion press and thereafter the profile is drawn. This is akin to a CD or a cassette being inserted into the player before playing or recording. The CD's by themselves do not become the player merely because they are inserted into the player. They are a different item. Likewise, die is also different from plant and machinery. 5. Die steel is an alloy and is imported during the year at the rate of ₹ 195 per kg. (approx.). A p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the year d) If the assessee claims that dies are to be treated as part of plant and machinery then also he should have increased the value of plant and machinery to that extent and claimed depreciation on the same 8. It is contended that the basis on which the Assessing Officer rejected the claim made that the dies are consumable expenditure and not plant and machinery, is erroneous. The appellant submits that the die is specific to execution of a particular order and once the order is executed, the die becomes valueless. In fact it will be completely worn out sometimes before the entire order is executed. Normally the life time of a die will not be more than a few months that is till the order is executed. It can fail even before it can be fully used as explained in the above paras. Once the order is executed of the particular product for a particular customer, the die gets consumed and becomes scrap. It become scrap even earlier also due to breakage, wearing out or becoming out of shape etc. Once the die is made, even if it is not used during the year yet it will have no value. No one buys it and even at the point of making a die, it becomes a consumable though ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns the same. Therefore even if it is assumed that it should be treated as plant and machinery, it falls within the realm of current repairs and will be allowable expenditure u/s 31 of the I. T Act. Kind attention is invited to the decision of the High Court in CIT Vs. TVS Motors Ltd. reported in 364 ITR 1 @ pages 11 to 14. The said decision fully supports the appellant's claim. 12. Reference is made by the learned Assessing Officer to a decision of the Hon'ble Supreme Court in CIT Vs. Mangayakrai Kasi Mills Pvt. Ltd. reported in 315 ITR 114. The facts of this case have no relevance at all to the facts on hand. The decision of the Hon'ble Supreme Court pertained to several items of plant and machinery which have been replaced. The old machinery was replaced by the new machinery as a result of which a new asset came into existence in the place of one. This was not a repair of old or the existing machine. What is more the machinery replaced brought about an advantage of enduring benefit. In the facts and circumstances of the case, the Hon'ble Supreme Court held that the replacement should be treated as plant and not merely repairs. The matter related to plant an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nature of installation of machinery in the factory. Such moulds and dies were normally attached to the machines to suit the individual requirement of particular product. So holding, the Tribunal held that expenditure incurred on replacement of dies and moulds was revenue in nature. It relied on the decision of Karnataka High Court in the case of Mysore Spun Concrete Pipe Pvt. Ltd, reported in 194 ITR159. 30. As far as this issue is concerned, learned counsel appearing for the assessee placed reliance on the decision of this Court reported in (2013) 357 ITR 720 (Mad) in the case of Super Spinning Mills Ltd., Vs. Assistant Commissioner of Income-tax related to the expenditure on replacement of the machinery parts. The assessee therein engaged in the business of manufacture and trading in cotton yarn and allied products and the assessee incurred expenditure in respect of replacement of certain textile machinery. On a question as to whether such replacement of parts would be current repairs of capital in nature, this Court considered the decisions in the case of CIT Vs. Saravana Spinning Mills P; Ltd., reported in (2007) 293 ITR 201 (SC), CIT Vs. Ramaraju Surgical Cotton Mills r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d otherwise, it would only make Section 3i(i) wholly redundant and absurd. Thus, replacement expenditure cannot be said to be 'current repairs' vide [2007J 293 ITR 201 (SC) (Commissioner of Income Tax Vs. Saravana Spinning Mills P. Ltd.) and 2009- TIOL-86-SC-II (CIT Vs. Sri Mangayarkarasi Mills P. Limited) (v) Expenditure is deductible under section 37 only if it (a) is not deductible under sections 30-36/ (b) is of a revenue nature, (c) is incurred during the current accounting year and (d) is incurred wholly and exclusive IV for the purpose of the business. - 2009- TIOL-86-SC-II (CIT Vs. Sri Mangayarkarasi Mills P. Limited); (vi) Expenditure is of a capital nature when it amounts to an enduring advantage for the business and repair is different from bringing a new asset for the business. Further, bringing into existence a new asset or an enduring benefit for the assessee amounts to capital expenditure vide Lakshmiji Sugar Mills (P) Co. v. CIT (AIR 1972 SC 159) referred in 2009TIOL-86-SC-II (CIT Vs. Sri Mangayarkarasi Mills P. Limited). (vii) Therefore, whether an expenditure is revenue or capital in nature would depend on the facts of each case. - [20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew asset or to obtain a new advantage, the said expenditure qualifies to be considered as current repairs under Section 31 of the Act. In so holding, after referring to the decision of the Apex Court in the case of CIT vs. M/s Saravana Spinning Mills P.Ltd., reported in (2007) 293 ITR 201, this Court further pointed out to the decision of the Apex Court where it cautioned that all repairs are not current repairs on Section 31(1) of the Act; Section 31(1) of the Act limits the scope of allowability of expenditure as deduction in respect of repairs made to machinery, plant or furniture by restricting it to the concept of current repairs . Thus, this Court pointed out that what is allowable as revenue expenditure under Section 37 of the Act are those expenditure other than one falling for consideration under Sections 30 to 36 of the Act. The Apex Court further pointed out the example that when the picture tube in a television set is replaced, such repairs would come within the connotation of the phrase current repairs . Thus, applying these two decisions, we have no hesitation in rejecting the Revenue's appeal. We hold that the claim being considered as current repairs, the same ..... X X X X Extracts X X X X X X X X Extracts X X X X
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