TaxTMI 
TaxTMI 
2018 (1) TMI 451
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....s only Ground No. 2 which is the effective ground for adjudication of the dispute and other grounds are merely argumentative in nature and hence the same are not pressed. Accordingly, the Ground Nos. 3 to 12 raised by the assessee are dismissed as not pressed. 3. The brief facts of this issue is that the assessee is engaged in the activities of conversion agent and manufacturing of angles, channels, flats, bars and rods. The return of income for the Asst Year 2010-11 was filed by the assessee company on 12.10.2010 disclosing total income of Rs. 69,57,590/-. The ld AO on perusal of the profit and loss account of the assessee, observed that it had debited an amount of Rs. 95,69,107*/- under sub head 'Rolls" in Schedule 'N' of Profit and loss account under head 'Operating and Other Expenditure'. On perusal of the details for the same filed by the assessee, the ld AO show caused the assessee as to why the same should not be treated as capital expenditure as it provides enduring benefit to the assessee. The assessee replied that these rolls were used in the process of manufacturing steel items and is purely consumable in nature and that no enduring benefit is derived by the assessee ....
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.... process of cooling and thereafter sent for sizing, bundling , etc. From the aforesaid manufacturing process, it was explained by the ld AR that the steel rolls get worn out warranting frequent replacement in 2 to 6 months. We find from the explanation of the aforesaid manufacturing process, steel rolls are not independent machinery but instead they are only part of a rolling mill. It does not contribute for the increase in production capacity of the products manufactured by the assessee company. Hence there is no enduring benefit or advantage derived by the assessee company in this regard. The replacement of steel rolls are merely operational expenses incurred in the ordinary course of business by the assessee. Moreover, from the details of replacement of steel rolls as tabulated hereinabove, it could be safely concluded that the steel rolls were replaced by the assessee on a regular basis and hence we hold that merely because the same is found as a separate line item in the Appendix I of Depreciation Rates Schedule, it does not take the character of capital expenditure automatically. We hold that since it is not a capital expenditure at all vis a vis the facts of the instant case....
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....diture incurred was on replacement of damaged moulds and was claimed as revenue expenditure, though prior to the commencement of the business, expenditure on moulds was capitalised. It may be mentioned that the same Appendix, referred to above, prescribed depreciation at 40 per cent. on moulds used in rubber and plastic goods factories and this item figures at (iii) under the head "Machinery and plant". This only shows that the rate of depreciation mentioned in the Appendix provides depreciation when the expenditure is considered as capital and not in the case where the expenditure itself is revenue in nature. Now, it is obvious that the nature of the assessee's business is such that it requires frequent replacement of rolls. The expenditure incurred thereon would certainly fall in the nature of current repairs as the same does not result in creating a capital asset or benefit of enduring nature. It may further be mentioned that in the case of Madras Cement Ltd. [1992] 42 175, the Income-tax Appellate Tribunal, Madras, had held that the expenditure incurred on replacement of part of capital item, though capitalised, would still be in the nature of current repairs. Entries made ....
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....for the revenue. He submits that the Tribunal has erred in treating the deduction claimed by the assessee as the revenue expenditure. 3. The assessee is running a steel rolling mill. In para 4 of the petition of appeal, it has been admitted that 'in the absence of rolls, it is difficult to prepare the finished products in the case under reference'. Yet the revenue alleges that the rolls cannot be treated as an integral part of that machinery or plant. 4. The Tribunal has found as a fact that 'the nature of the assessee's business is such that it requires frequent replacement of rolls. The expenditure incurred thereon would certainly fall in the nature of current repairs, as the same does not result in creating of capital asset or benefit of enduring nature'. 5. We find that in the circumstances of the case, the view taken by the Tribunal is just and reasonable. It is not shown to be contrary to any provision of law. In fact, it is the revenue's own case that the frequent change of rolls is essential for preparing the finished products. Thus, no substantial question of law arises. 6. Mr. Sawhney submits that the rolls were purchased after October ....