TaxTMI 
TaxTMI 
2010 (9) TMI 162
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....of Rs.26,50,090/- on such repairs in its Banaspati Unit. The Assessing Officer (AO) disallowed the expenditure to the extent of Rs.8,12,894/- holding the same to be capital in nature and therefore inadmissible. The details of these expenses are as under:- (a) Amount paid to M/s. J.B. Singh, Contractor, for fabrication and errection charges of Cell-room. Rs.50,375 (b) Amount paid to M/s. Anurag Construction Co. for dismantling of old PCC & RCC work in Cell-room. Rs.16,830 (c) Amount paid to M/s. Ajanta Builders for construction of weigh-bridge Railway Siding. Rs.36,377 (d) Amount paid to M/s. Anurag Construction Co. for dismantling of PCC in Cell-room. Rs.10,747 (e) Amount paid to M/s. Cromption Graves Ltd. for two No. Transformers. Rs.2,77,886 (f) Cost of pumping Set with 20 HP Motor 1. Rs.10, 948 (g) Construction of Cell Rooms. Rs.2,67,712 (h) Expenses incurred on project report for information of Vanaspati paid to Techno-Chem Equipment Manufacturers (P) Limited Rs. 63,000 (i) Cost of Electric Motors75 HP Rs.36, 694 (j) Cost of Motor 20 HP Rs.6,443 (k) Consultancy charges for selection of boiler paid to M/s. Dalal Consultants & Engineers (P) Ltd. Rs.7,000 (l....
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....ubmitted that expenditure mentioned in Para (i) above pertaining to cell rooms cannot be classified as capital in nature since no new asset came into existence. Cell room was already in existence and the appellant merely carried out repairs of the same by dismantling some worn out portions of the cell rooms and putting up new construction. The same cannot, it was submitted, lead to the conclusion that a new asset building was brought into existence. It is argued that the cell rooms are not an independent plant but merely a part of the larger plant and is used for a specific hydrogenation process, which itself is a part of Vananspati Oil manufacturing process. He referred to a recent judgment of this Court in the case of Commissioner of Income Tax Vs. Delhi Press Samachar Patra (P.) Ltd.[322 ITR 590] wherein the assessee carried out repairs to the factory building, which was constructed in the year 1975. The nature of expenditure represented water proofing of roofs, reinforcement of old beams in which steel bars and plasters had corroded, relaying of worn out flooring of print shop, repairing of roads, repairing and replacement of workers‟ wash rooms, boundary walls and gates,....
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.... or the authorities below. It was ultimately concluded that employing the test indicated in Saravana Spinning Mills (Supra), the assessee had incurred the said expenditure only to preserve and maintain the existing asset and that the expenditure was not of a nature which brought into being a new asset or created a new advantage of an enduring nature. Consequently, the Tribunal deleted the disallowance." (emphasis supplied) 8. Reading of the aforesaid judgment would bring forth the principle that if a part of the structure becomes dilapidated and repairs/reinforcement of some parts of the said structure was required, it would be treated as „current repairs‟. However, on the other hand, if a part of the building is demolished and new structure is erected on that place, it has to be treated as capital expenditure, as in that case totally new asset is created even if it may be a part of the building. 9. When we apply this principle to the facts of the present case, it is difficult to accept that the expenditure incurred on cell room was in the nature of „current repairs‟. From the items of expenditure, it is clear that after completely demolishing the old cell....
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....re not of capital nature. However, even Section 37(1) excludes those items of expenditure which expressly falls in Sections 30 to 36. The effect is to delimit the scope of allowability of deductions for repairs to the extent provided for in Sections 30 to 36. To decide the applicability of Section 31(i) the test is not whether the expenditure is revenue or capital in nature, which test has been wrongly applied by the High Court, but whether the expenditure is "current repairs". The basic test to find out as to what would constitute current repairs is that the expenditure must have been incurred to "preserve and maintain" an already existing asset, and the object of the expenditure must not be to bring a new asset into existence or to obtain a new advantage. In fact, in the present case, in the balance sheet the assessee, viz, M/s Saravana Spinning Mills has indicated the above expense as an item incurred for purchase of a New Asset. In our view, the High Court had erred in placing reliance on the report of SITRA in coming to the conclusion that the textile mill is a plant under Section 31(i). As stated above, each machine in a segment has an independent role to play in the mill and....