TaxTMI 
TaxTMI 
2022 (9) TMI 290
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.... 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/- towards spares purchase treating the same as capital expen....
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....y 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 indicated No. of spindles : 1.008 In this very invoice, the German company i.e., Spindlefab....
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....al 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 assessee's own case for the assessment year 2007-08 in ITA No.1847/Mds/2011 dated 20.01.2012 allowed the claim of the assessee holding that expenditure on compact spinning system is a....
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....levant 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 purchased 33 number of ring frames and 18 ring frames fitted with gadgets. The company has purchased 18 number of sets, as one set is required for one ring frame. Thus, total number of gadgets f....
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.... 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 'Compact Spinning System', these hairy substances are removed and yarn gets a shining. Manufacturing premium quality of yarn which fetches higher price in the market and attracts h....
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....ing 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 co-ordinate Bench of this Tribunal, we reject the grounds of appeal of the Revenue." 5.2 Even this issue is considered by the Hon'ble High Court of Madras in the case of Super Spinning Mills Ltd., [2013] 3....