TaxTMI 
TaxTMI 
2018 (10) TMI 1695
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....t Year2004-05 and 2005-06 respectively. ITA No.2902/Ahd/2016/ for A.Y. 2004-05(by Revenue): 1. Sole Ground raised by the Revenue read as under : "1. On the facts and in the circumstances of the case and in law, the learned CIT (A) erred in holding that huge machinery worth Rs. 1,36,77,287 were replacement items of existing assets and hence, , deleting the addition disregarding the findings of A.O. and ratio laid down by the Hon'ble Supreme Court in the case of CIT vs Sri Mangayarkarasi Mills (P.) Ltd. 315 ITR 114 (SC) wherein law was declared by the Apex Court that replacement of old machineries with new one would constitute bringing into existence a new asset of enduring benefit to the assessee, thus is capital in nature....
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....ioning independently. The expenditure on replacement of Rotor Assembly has already been treated as revenue expenditure by CIT(A) in the appellants own case for A.Y.2010-11 therefore, deleted the addition in respect of these two items considering the same as allowable revenue expenditure. The CIT(A) was of the view that these parts are for replacement for existing parts of the Turbines and no new asset has come into existence. Similarly, with regard to Gear Shaft, Gear Part and Nozzles were held to be incurred for replacement of existing assets which had become obsolete / got damage and their replacement was necessary to restore the existing facilities to the smooth running and original state of efficiency. Further, such expenditure were alr....
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....nd spares of Rs. 9,548.68 lakhs and claimed the same as revenue expenditure. However, out of that, the Assessing Officer (AO) has disallowed Rs. 3,00,96,651/- treating it as capital expenditure after allowing the depreciation of Rs. 45,14,498/- thereon. The AO has made disallowance of net amount Rs. 2,55,82,153/- on the ground that the items are in the nature of independent machine and average life span is 5 years or more and in one item life span is 20 years which suggests that these items can be used independently. 14. The assessee went in to appeal before the CIT(A). The CIT(A) after examining the facts of the case and items of machinery to replace component and relying on various case laws examined the explanation of the assess....
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....dismissed the appeal of Revenue on this ground. Further, reliance placed in the case of Sri Mangayarkasi Mills (P) Ltd (supra) is not applicable, as in that case replacement of old machinery with new machinery was treated as capital expenditure, whereas, in the instant case, there is replacement of damaged part in view of Chartered Engineering certificate in respect of Turbine Rotor Assembly, Gear shaft with Gear Part , Nozzles Ring , 415 V, 3000A 3 PHH PMCC for CHP are the part of main machine not capable of functioning independently, hence, facts are distinguishable. Therefore, the appeal of the revenue in respect of Ground No.1 is dismissed. 8. In the result, appeal of Revenue for A.Y. 2003-04 is dismissed. ITA No.2903/Ahd/2016/ fo....
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....d as capital expenditure on the grounds that these parts are giving enduring benefits to the assessee. 11. Being aggrieved, the assessee filed appeal before the ld. CIT (A) who after considering the submission of the assessee has observed that the assessee has filed Chartered Engineering certifying Turbine Rotor Assembly, Gear shaft with conversion for pump block, set of impellers and narxno are the part of main machine not capable of functioning independently. Therefore, the addition in respect of these three items considering the same as allowable revenue expenditure. The CIT (A) was of the view that these parts are for replacement for existing parts of the Turbines and no new asset has come into existence, hence, these were held to be....