2011 (10) TMI 44

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....e. The tribunal has accepted the stand of the respondent-assessee that the expenditure incurred by the assessee on the purchase of moulds is revenue expenditure. 3. It may be relevant to reproduce the stand of the assessee before the Assessing Officer, which is elucidated in paragraph 23 of the impugned order:- " The brief facts of the case are that the assessee has debited a sum of Rs.3,78,27,658/- under the head machinery repair and maintenance in Unit C-5. This unit was manufacturing plastic components, namely, shell,roller, lock, CD shell box etc. These components are primarily used for assembling of audio cassettes and packing of CDs. The assessee had installed more than 100 injection moulding machines at Unit C-5 which was estab....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....hedule in the Income Tax Rules, 1962  and the rate of depreciation is specified @ 40% and, therefore, the moulds are capital asset and purchase price of the moulds cannot be treated as revenue expenditure. The reasoning of the Assessing Officer is as under:- "During the assessment proceedings it was noticed that assessee has debited a sum of Rs.3,78,27,658/- under the head ?Machinery Repair and Maintenance? in Unit C-5, Phase-II, Noida, which manufacture plastic components. The details filed by the assessee and on examination of books of accounts it was noticed that the assessee has purchased moulds, the details of which are given as under and has debited the expenses as revenue expenditure under the head ?machinery repair and maint....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....asset does not come into existence but the expenditure incurred is towards purchase of parts for repair or maintenance of existing machinery. (Difference between repair and maintenance is not relevant and urged in the present appeals). No new or fresh advantage of enduring benefit materializes but the purpose is to preserve and maintain an already existing asset. The expenditure incurred on replacement of the moulds is in the nature of replacement of parts of the old machines which continues to exist and remains the capital asset. 6. The tribunal in the impugned order has rightly relied upon the decision of this Court in Commissioner of Income-Tax Vs. Jagatjit  Industries Ltd. [2000] 241 ITR 556, wherein it has been held as under:- ....