TaxTMI 
TaxTMI 
TaxTMI 
2022 (4) TMI 320
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....oth in law and on facts by transgressing from the Ld. AO's findings which clearly speak elaborately in his impugned order that the treatment of Repairs Expenses by him as Capital Expenses has been based only on the largeness of repair expenses in amount and not on any other ground. 4) The Ld CIT(A) further erred both in law and on facts by not allowing the foreign travelling expenses by taking an untenable stand despite proofs and evidences for such travels to the CPHI Fairs were presented before him. 5) The Ld CIT(A) ought to have allowed the appeal in toto 6) The order of Ld CIT(A) may be set aside and the expenses on Repairs of Machinery be allowed to be held as revenue in nature as have been debited to the Profit and Loss Account. 3. Brief facts of the case are that the assessee company is engaged in the business of manufacturing of organic and inorganic chemicals. Assessee has efiled its return of income on 10.9.2012 declaring total income at Rs.NIL, and thereafter assessee filed a revised return on 18.9.2012 declaring total income at same figure i.e. Rs.NIL. The case of the assessee was selected for scrutiny assessment by issuance of notice under section 143(2)....
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....ant & machinery, and therefore, the ld.AO issued a show cause as to why the expenditure incurred for purchase of these items, should not be treated as capital nature. In reply, assessee contended that these were consumable items and should be allowable as revenue expenditure. However, ld.AO has not satisfied with the reply of the assessee, he accordingly made an addition of Rs. 13,06,564/-i.e. Rs. 3,95,130/- plus Rs. 9,11,434/-) and granted benefit of depreciation at 15% of the addition. In other words, the ld.AO made a net addition of Rs. 11,10,580/- to the total income of the assessee. 6. Aggrieved with the order of the AO, the assessee went in appeal before the ld.CIT(A). The contentions of the assessee before the ld.CIT(A) were that the sole criteria for treating the impugned expenditure as that of capital in nature by the AO was that of their cost, and the AO totally disregarded business exigencies and nature of business carried out by the assessee. It was submitted that since the assessee is a chemical company, plant & machineries are prone to corrosion. All the items purchased are to be fitted to the main plant & machinery to make the existing machines to work as usual, fla....
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....not come under the capital expenditure, and the same be treated as revenue expenditure. The assessee also relied upon the following judgments: i) CIT Vs. Satyadev Chemical, 226 ITR 95 (Guj) ii) CIT Vs. Renu Sagar Power Co.Ltd., 298 ITR 94 (All) iii) CIT Vs. Cooperative Sugar Ltd., iv) Chodavaram Co-operative Sugar Ltd., Vs. DCIT, 82 ITD 47 (Visakha). 8. In reply, the ld.DR supported orders of the Revenue authorities and prayed to confirm the same. 9. We have given our thoughtful consideration of the issues. We have also perused papers and supporting material filed by the assessee before us in paper book. We find that the ld.CIT(A) while partly allowing the claim of the assessee, has observed that items like agitators, condenser, PP Plates and fabrication of structure with a manual closing, and injection pallets used in factory stores for stacking purposes are capital assets, and therefore, their costs needed to be capitalized. However, cost of filter plates used in standard filter press was in the nature of repairs to the plant & machinery, and therefore, they are revenue in nature. This finding of the ld.CIT(A) was not based on some scientific or technical examination, r....
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....on in the case of CIT V/s. Saravana Spinning Mills (supra), has laid down the same proposition of law. On the other hand, the decisions relied upon by the assessee as noted in the order of the CIT(A) clearly supports the view that the expenditure incurred by the assessee cannot be treated as capital expenditure." 10. The revenue was simply carried away by the size amount rather than nature and import of the items purchased. There is no basis with the revenue authorities, which indicates that the impugned expenditure was in the nature of capital. Therefore, keeping in view overall nature of items purchased by the assessee, we are of the considered view that whatever expenditure incurred for purchasing of these items were the business expenditure, and wholly and exclusively incurred for running day-to-day operational necessity in order to keep the entire plant & machinery functional and efficient. We allow claim of the assessee to treat the impugned expenditure as revenue expenditure. 11. On the second issue, viz. foreign travelling expenditure incurred by the Directors of the company to China, Germany and other countries are concerned, these visits were not doubted by the lower a....