TaxTMI 
TaxTMI 
2012 (11) TMI 1268
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.... year 2007-08, while as the assessee is in appeal in ITA No.959/Ahd/2012 and ITA No.1751/Ahd/2012 for the assessment years 2008-09 and 2009-10 against the orders of the learned CIT(A)-I, Baroda (i) in appeal No. CAB-I/124/10-11 dated 16-02-2012 and (ii) in appeal No. CAB-I/217/11-12 dated 05-05-2012 respectively. All the above orders of the learned CIT(A) are passed u/s 250 read with section 143(3) of the IT Act and the issue is identical viz. "disallowance of purchase and consumption of tools and instruments as revenue expenditure treating it to be as capital expenditure". Since the issue is identical in all the appeals they were heard together and are being disposed off by this consolidated order for the sake of convenience. ITA No.245....
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....idering the submission of the assessee the learned AO arrived at the following conclusion. "In view of the above discussion, the tools and instruments are treated as part of plant and machinery. Consequently, expenditure on purchase of tools, etc. of Rs. 37,07,660/- [ Rs. 39,32,660/- less Rs. 2,50,000/-] is disallowed as capital expenditure and added to the income of the assessee. Since, the assessee has not submitted as to when these assets were put to use depreciation at half of the eligible rate is allowed. Accordingly, after allowing depreciation a net disallowance of Rs. 34,29,585/- [Rs. 37,07,660 less ½ depreciation of 7.5% Rs. 2,78,075 ] is made and the same is added back to the total income of the assessee. In arr....
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....and submitted that this issue is covered by various decisions of the ITAT Ahmedabad Benches and the order of the Hon'ble Jurisdictional High Court of Gujarat in the case of the assessee and in support of his contention he referred to paper book pages 7 to 46. 5. We have heard the rival submissions and carefully perused the materials on record along with paper book submitted by the assessee containing pages 1 to 46. On perusal of records, it is apparent that this issue has been decided by our Co-ordinate Benches against the revenue and in favour of the assessee for the assessment year 2006-07 in the departmental appeal in ITA No.728/Ahd/2010 vide order dated 14-09-2012. The relevant portion of the aforesaid order is reproduced herein unde....
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....ssessee has not valued the stock of consumables and considered it as part of closing stock of inventory but has written it off to the profit and loss account. Further CIT(A)has given a finding that none of the items of consumables have a life of more than a few days. The quantity consumed itself indicates that the life of each item was very short. No item of purchase has been identified which could qualify as a capital item. From the nature of items it is quite apparent that the purchased related to items to items of day to day consumption in the ordinary course of manufacturing business. The accounting method followed by the assessee has not been disputed by the Ld. D. R. The learned D. R. also could not controvert the findings of CIT(A) b....
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....eproduced herein below for reference: "1. Ld. CIT(A) erred in law and on facts in confirming action of AO in making addition of Rs. 27,35,460/- by disallowing revenue expenses claimed in Profit & Loss a/c on account of consumption of tools and instruments. Both the lower authorities failed to appreciate the fact that the appellant claimed expenses in respect of tools/instruments consumed in the manufacturing process that were duly written off in the books of account. Ld. CIT(A) ought to have held the expenses to be revenue in nature for the consumables as certified by the Chartered Engineer and ought to have deleted the disallowance made by AO." ITA No.1751/Ahd/2012 (Assessee's appeal for AY 2009-10) 8. In this appeal the ass....