TaxTMI 
TaxTMI 
2016 (3) TMI 584
X X X X Extracts X X X X
X X X X Extracts X X X X
....ncurred on repairs and maintenance treating the same as capital expenditure. 3. Briefly stated facts are that the assessee during the AY 2004-05 incurred expenditure on repair and maintenance of ovens at Rs. 46,65,954/- and during AY 2005-06 at Rs. 25,08,182/-. The AO in both the years treated this expenditure on repairs and maintenance of Coke Woven as capital expenditure u/s. 31 or 37(1) of the Act. The AO while disallowing expenditure as capital expenditure allowed depreciation in respect of the said expenditure in both the years. The relevant finding as given in AY 2004-05 in para 8 of AO's order reads as under: " 8. From the facts and circumstances discussed in Sr. Nos. (1) to (VII) above, it is therefore clear that the ovens in question were subject to extensive and complete overhauling during the period of those three months so as to withstand the workload over a long period of time. It is also clear that the assessee might have claimed it as repairs but in effect there was substantial reconstruction of the ovens in question. In other words, although no new asset was created, the advantage, which was created by incurring such expenses, was created for the endurin....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Similar is the finding in AY 2005-06 also. Aggrieved against the action of the CIT(A) in both the years, revenue is now in appeals before us. 4. We have heard rival submissions and gone through facts and circumstances of the case. The Ld. Counsel for the assessee explained that there was no denial of the fact that the repairs of the Ovens were extensive, but that by itself cannot be a ground for treating the expenditure as Capital expenditure as conceived under the Act. Our attention was invited to the submissions made before the A.O. by letter dtd.26.12.2006 in which the reason for making extensive repairs and the substantial expenditure incurred therefore was explained and the same is set out hereunder for proper understanding of the case. "This was a boom year for Coke-Oven Plants. The assessee, therefore, did massive repairs to the plant for taking maximum benefit out of the plant. The company's Coke Oven Plant is a very old one. It has 46 ovens. The first block of 14 coke ovens was constructed long back during 1978-79, and thereafter more coke ovens were added in subsequent years and by 1989 the assessee's plant had 46 coke ovens. There had been no additi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ade was also explained. He also argued that no new asset was brought into existence and no part of the expenditure was a Capital expenditure as conceived u/s.31 of the. Reliance was placed on several court decisions in support of the submissions. 5. We find that assessee's submissions did not find favour with the A.O. and he treated the entire expenditure as Capital for the reasons which are already set out in Para 3 above. The entire premise of the AO was on the explanation to sec.31 of the Act inserted w.e.f. AY 2004- 2005, which states that "if the cost of current repairs is of the nature of Capital expenditure then such expenditure shall not be allowed as deduction". We are of the view that the explanation referred to by the AO is not correctly set out. The explanation inserted actually reads as "For removal of doubts, it is hereby declared that the amount paid on account of current repairs shall not include any expenditure in the nature of Capital expenditure". The explanation did not in any way alter the purport and meaning of repairs as conceived u/s.3l of the Act. It only explained the correct legal position as settled by Court decision. There was no denial of the fa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Ltd. (2008) 302 ITR 13 (Mad). In both these cases the Hon'ble court has held that expenditure on replacement of independent complete machinery was a revenue expenditure entitled to deduction. In these cases the Hon'ble court gave the decision by following their earlier decision in the case of CIT Vs. Janakiram Mills Ltd. (2005) 275 ITR 403 (Mad). 7. In view of the above facts and circumstances and the judicial pronouncements, we are of the view that in the present case simply because there was massive repairs and substantial expenditure incurred by assessee on repairs the same cannot be treated as capital in nature for the reason that there was no expansion of the coke ovens but the number of ovens remained the same at 46 as in 1989. No new coke ovens were add-up by incurring the expenditure and moreover there was no vacant space in the factory to set up additional coke ovens. The expenditure was incurred only on fire bricks, fire clay and tiles and no expenditure on steel and other materials were required for construction of new coke ovens as is evident from bills and vouchers. Secondly, repairing was done from outer side of the ovens and the platform from where the heated ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pect of expenditure of Rs. 75,000/- incurred in FY 2001-02 relevant to AY 2002-03 and subsequent years the same has all along been allowed being one-fifth as per the provisions of section 35D of the Act. We find no infirmity in the order of the CIT(A) in allowing this claim of assessee. Accordingly, this issue of revenue's appeal is dismissed. 11. The next issue in ITA No. 1874/K/2008 for AY 2005-06 is as regards to the order of CIT(A) setting aside the issue to the file of the AO for verification in respect to addition of Rs. 10,50,807/- by invoking the provisions of section 40(a)(ia) of the Act for non-deduction of TDS on the expenses of security guard and import expenses as well as interest on loan. We find from the order of the CIT(A) that the assessee has made payments of TDS and these payments are made within the due date of filing of return of income by the assessee as is evidenced from the details given before the CIT(A), which reads as under: SN Nature of payment Amount of Expenditure TDS amount Date of payment Due date of payments as per amendment 13 14 19 23 Security Guard Services Import Expenses Import expenses I....