TaxTMI 
TaxTMI 
2022 (8) TMI 671
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....e facts that the rolling mills rolls is required to be consumed and therefore the assessee has rightly claimed the same as business expenditure and therefore the lower authority has erred in granting the depreciation only. It is prayed that the addition made may please be deleted." 3. At the outset, before us, Ld. Counsel for the assessee has submitted that he shall not be pressing ground number 1. Accordingly, ground number 1 of the assessee's appeal is being dismissed as withdrawn/not pressed. Ground number 2: disallowance of expenditure under the "head repairs and maintenance" of Rs. 20,63,537/- 4. The brief facts in relation to this ground of appeal are that the assessee company is engaged in manufacturing of steel products of MS Angel, MS Channel and MS Beam. During the course of assessment, the AO noticed that the assessee had debited expenses amounting to Rs. 50,97,107/- as expenses on account of purchase of Rolling Mill Rolls and claimed the same as revenue expenditure. The AO issued show cause notice, requiring the assessee to explain why the claim of expenditure on account of purchase of rolls should not be disallowed as revenue expenditure as the use of metal roll....
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....n the iron, steel industry is being treated as capital expenditure. For the sake of example, M/S The Tinplate Company of India, which is a. Tata Group Company, in its accounts has treated the Steel Rolls as capital expenditure. The ld. AR on being confronted further could not produce any explanation except reiterating the earlier. In view of the above, the claim of the assessee is disallowed as revenue expenditure and the same is liable to be treated a capital expenditure. Accordingly, the depreciation @80% is allowed on the total expenditure of Rs. 50,97,107/- on account of purchase of rolls. The difference amount of Rs. 20,63,537/- worked out as under is disallowed: xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx" 5. In appeal, the assessee reiterated the arguments before Ld. CIT(A). However, he rejected the assessee's contention and upheld the order of the AO, with the following observations: "3.4 After going though the facts of the case, it is seen that the steel roll are used regularly and have life span of less than one year but the mere fact cannot change the nature of expenditure. In fact, these are aspects are....
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..... 368 & 369/Kol/2010, the Kolkata Tribunal made the following observations on this issue: We further find force in the contention of the Ld. Counsel for the assessee that since in this case rolls used in iron and steel industries are the parts of the machinery and are replaced very frequently during the year the expenses incurred on replacement of the rolls is allowable as current repairs, therefore, cannot be disallowed simply because assessee was entitled to get 80% depreciation on this item u/s. 32 of the Act. The Hon'ble Delhi High Court in the case of CIT Vs. Hi Line Pens Pvt. Ltd. (Supra) has held as under: "Held, that the replacement was not of the premises but of certain "parts" such as the internal wires and GI Pipes. The analogy of replacement of the entire machine was not applicable to the case of the assessee. It was not the intention of the assessee to bring about any new capital asset. The expenses incurred by the assessee were towards repairing the premises taken on lease so as to make them more conducive to its business activity. Such expenses could fall within the expression of repairs to the premises as appearing in section 30(a)(i). Once the assessee'....
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....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-à-vis the facts of the instant case and the manufacturing process involved therein, the explanation to section 30 and 31 of the Act brought into the statute with effect from 1.4.2003 would ....
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....enance is not relevant and urged in the present appeals). No new or fresh advantage of enduring benefit materialises but the purpose is to preserve and maintain an already existing asset. The expenditure incurred on replacement of the moulds is in the nature of replacement of parts of the old machines which continues to exist and remains the capital asset. The tribunal in the impugned order has rightly relied upon the decision of this Court in Commissioner of Income-Tax Vs. Jagatjit Industries Ltd. [2000] 241 ITR 556, wherein it has been held as under:- "Whether on given set of facts, replacement of certain items, forming an integral or important part of the machinery would be revenue expenditure or capital expenditure is primarily a question of fact, to be decided in the context of the business carried on by an assessee. Merely, because the benefit accruing by the expenditure is of enduring nature, is by itself not a conclusive test to hold it as a capital expenditure (see Empire Jute Co. Ltd. v. CIT [1980] 124 ITR 1 (SC)]. Normally initial investment on machines and their parts will be in the nature of capital expenditure but replacement of parts of an existing machinery in the c....