2022 (9) TMI 290

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....ncome Tax Officer, Non-Corporate Ward - 4(1), Coimbatore for the assessment year 2017-18 u/s.143(3) of the Income Tax Act, 1961 (hereinafter the 'Act') vide order dated 21.08.2018. 2. The only issue in this appeal of assessee is as regards to the order of CITA() not allowing the replacement of spare parts as revenue expenditure and treated the same as capital expenditure. Without prejudice, the assessee has also raised allowance of claim of deduction u/s. 80IA of the Act and computed levy of taxes u/s.115JC of the Act. For this, assessee has raised the following effective grounds:- 2. Without prejudice to the above it is also submitted (i) the CIT(A) is erred in not allowing revenue expenditure of Rs. 1,06,89,395/- towa....

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....IT(A) also confirmed the action of the AO and noted that the amount spent by the assessee for replacement of machinery is sizable amount which cannot be attributed to spare parts or it is clearly the replacement of machinery itself and therefore, treated the expenditure as capital in nature. Aggrieved, assessee came in appeal before the Tribunal. 5. We have heard rival contentions and gone through facts and circumstances of the case. We noted from the invoice that the spare parts purchased by assessee is consisting of Elite Compact set for LMV LR 6/S Ring Spinning Frames and the description of machinery to be converted is as under:- Manufacturer and type : LMW LR 6/S Spindle gauge : 70 mm Ring diameter : to be ....

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.... extended." 5.1 We also noted from the invoice that the quantity of units is four sets. We noted that exactly on identical facts, the Co-ordinate Bench of this Tribunal in the case of DCIT vs. Prabhu Spinning Mills P Ltd., ITA No.603/Mds/2013, order dated 29.08.2013 has considered exactly identical issue and discussed the same compact spinning system and determined the nature of expenditure and Tribunal considered this issue vide para 12 as under:- "12. Heard both sides. Perused the orders of lower authorities and the decision of the co-ordinate Bench of this Tribunal in the assessee's own case for the earlier assessment year i.e. 2008-09. The Commissioner of Income Tax (Appeals) following the decision of Tribunal in the assesse....

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....rafting system is situated in the ring frames. The conventional drafting system has been replaced with the latest, state-of-the-art gadget called 'Compact Spinning'. After examining the relevant details, we have found that this is a single piece gadget which is fixed to each Spindle. It is not a 'machinery' by itself but only an 'attachment to the machine' (like manual analog wall clock is fixed with battery operated system). It has been claimed as revenue expenditure. The old drafting systems have become scrap on replacement. The ld. A.R has taken us through a set of colour photographs to illustrate the nature and working of this 'Compact Spinning System'. It is seen from the records [paper book page 5] that the assessee had purcha....

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....s found for a fact that all the ring frames have not been replaced with the latest gadget. Only certain number of ring frames are fitted with this new gadget and the remaining continued to manufacture earlier quality of yarn catering to the requirement of lower strata of the society. Out of 50 ring frames, only 37 ring frames are fitted with this gadget and the remaining are running with conventional gadget. This fact was also found to be undeniable and to be correct. It was also found to be a fact that the old drafting systems simply become scrap on replacement and cannot be used again as such. We are convinced that the yarn normally contains 'hairy' substance like bristles on the side of the thread and when this yearn is sent through the ....

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....ench of the Tribunal after discussing the facts of the case and the aforesaid decisions of the Hon'ble Apex Court came to the conclusion that the expenditure incurred by the assessee on introducing the Compact Spinning System is Revenue in nature and is thus an allowable expenditure. 7. Since the issue in hand is similar to the one decided by the Coordinate Bench of the Tribunal, we respectfully follow the decision of the Tribunal in assessee's own case for the AY. 2007-08, and dismiss this appeal of the Revenue holding the expenditure incurred by the assessee on introducing Compact Spinning System as Revenue Expenditure. Accordingly, the appeal of the Revenue is dismissed." 13. Respectfully following the decision of the c....