2016 (7) TMI 907

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..../s.147 of the Act. 3. The facts of the issue are that the assessee company is engaged in manufacture of automobile component and also making dyes & moulds, jigs and fixtures and special purpose tools as per customer's requirements. The assessee filed e-return for assessment year 2008-09 on 29.09.2008 admitting an income of Rs. 1,12,41,631/- and the assessment u/s.143(3) was completed on 27.12.2010 accepting the income returned. Subsequently, the AO found that under the head 'Manufacturing and other expenses' an amount of Rs. 67,39,084/- was included as expenditure on replacement of tools which requires to be disallowed and capitalized. Therefore,, the assessment was re-opened by issue of notice u/s.148 on 10.04.2012. Finally, the AO comple....

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....evant assessment year and in view of the Explanation-1 to sec.147 of the Act, the AO is justified in issuing the notice u/s.148 of the Act for the purpose of re-assessment. After First April, 1989, the AO has power to reopen the assessment u/s.147 of the Act provided AO has a reason to believe that income has escaped assessment and there is tangible material to come to the conclusion that there is an escapement of income; "mere change of opinion" cannot be a reason for reopening the concluded assessment. The issue was taken by the Supreme Court in the case of CIT Vs. Kelvinator of India Ltd.(supra), which is relating to the assessment year 1987-88. However, after amendment to Sec.147 with effect from 01.04.1989 where an income liable to be ....

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....ised by the assessee for assessment year 2008-09 stands rejected. 6. Coming to the second common ground in both the appeals is with regard to treatment of expenditure on tools as capital expenditure. According to ld.A.R, the life of the tools is very short like screw drivers, spanners which are purchased along with machineries. These items by wear and tear, gets worn out and have to be replaced and such replacement are revenue expenditure only and cannot be considered as capital expenditure. Ld.A.R placed reliance on the following judgments. 1. In the case of CIT Vs. Manohar Lal Hira Lal Ltd. reported in [2013] 39 Taxmann.com 110 (Allahabad) 2. In the case of CIT Vs. TVS Motors Ltd. reported in [2014] 45 Taxmann.com 94(Madras) 7. On the....

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.... which are specific to a particular item of fixed asset and their use is irregular, then, they should be capitalized separately and depreciated on a systematic basis over a time frame not exceeding the useful life of the fixed asset to which they relate. As a matter of fact, in case the fixed asset to which they relate, is discarded, the machinery spares will also have to be disposed of as these spares are integral parts of the fixed asset. It is to be noted that these Accounting Standards are mandatory in nature and applied to accounts prepared after April 1, 1999. In that sense the submission of the assessee has to be accepted that the change in the accounting policy had been brought about by virtue of the issuance of the revised accounti....