2015 (1) TMI 430

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....respondent is a Textile Mill, functioning in Guntur District. In the returns filed for the assessment year 1995-96, it claimed deduction under Section 31 of the Income Tax Act, 1961 (for short the Act), in relation to the cost incurred for replacement of two parts known as Conors, in one of the machines. The Assessing Officer did not allow deduction by treating the items as addition to the machinery, and thereby, constituting capital expenditure. The appeal preferred by the respondent was allowed by the Commissioner of Income Tax (Appeals). The Department carried the matter in appeal to the Tribunal. Through the order under appeal, the Tribunal dismissed the I.T.A., and upheld the view taken by the Commissioner. Hence, this appeal. Ms. M.K....

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....nsel for the appellant are totally different from those in the case on hand. The provision, which becomes relevant for this case, is, Section 31 of the Act. It reads: Repairs and Insurance of machinery, plant and furniture. In respect of repairs and insurance of machinery, plant or furniture used for the purposes of the business or profession, the following deductions shall be allowed (i) the amount paid on account of current repairs thereto; (ii) the amount of any premium paid in respect of insurance against risk of damage or destruction thereof. From a perusal of this, it becomes clear that an assessee would be entitled to deduct the expenditure incurred for any current repair to machinery or plant; and the one incurred for payment ....

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....capacity of the machinery. What appears to have impressed the Assessing Officer to treat replacement of two Conors as not qualifying for deduction under Section 31 of the Act, is that, the respondent itself has shown the expenditure incurred for replacement of two Conors, in the preceding assessment year, as capital expenditure. This aspect has been clarified by the Tribunal. It was mentioned that during the earlier assessment year, the respondent has acquired new item of machinery and the Conors were referable to that new machinery itself. In the assessment year 1995-96, no such acquisition, of machinery, has taken place. The mere fact that the new parts are different from those that were replaced, in terms of cost, or efficiency; by itse....