2023 (6) TMI 524

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....g to the Asst. Year 2017-18. 2. The only ground raised in the appeal is as under: "That the ld. National Faceless Appeal Centre, has erred in law and facts by confirming the disallowance of repairs to machineries of Rs. 37,50,699/- on the ground that it is capital expenditure and therefore theld.AO should be directed to delete the said disallowance while computing the total income." 3. A perusal of the above ground reveals that the solitary issue in the present appeal relates to disallowance of repairs to machineries amounting to Rs. 37,50,699/-, treating it as capital expenditure. 4. We have heard both the parties and carefully perused the orders of the authorities below. The assessment order reveals that the assessee had claimed repa....

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....s been considered and found to be not tenable. On verification of the bills submitted by the assessee it is seen that the above expenditure were incurred in connection with the replacement of various parts of machinery and not mere repairing charges or any other expenses of recurring nature. Many of the bills are regarding the machinery parts which are replaced after a particular period of time. Therefore, such expenses cannot be treated as revenue expenditure. . 5.5 Reliance is place in the case of Ballimal Naval Kishore Vs. Commissioner of Income-tax SC-HC/AAR [1997] 224 ITR 414 (SC)/[1997] 90 TAXMAN 402 (SC)/[1997] 138 CTR 284 (SC) wherein it was held as under: "Section 31 of the Income-tax Act, 1961, corresponding to section 10(2)(v....

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....epairs but a total renovation of the theatre. New machinery, new furniture, new sanitary fittings and new electrical wiring were installed besides extensively repairing the structure of the building. By no stretch of imagination, could it be said that the said repairs qualified as "current repairs" within the meaning of section 10(2)(v). It was a case of total renovation and had rightly been held by the High Court to be capital in nature." 5.6 The assessee has incurred a sum of Rs. 72,79,4777- for repairs to machineries. By no stretch of imagination, could it be said that the said repairs qualified as "current repairs". It was a case of total replacement and had to be held as capital in nature. 5.7 In view of above discussions the expen....

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.... revenue expenditure. The AO is directed to restrict the disallowance to the extent of Rs. 37,50,699/- in place of Rs. 72,79,477/- and further allow depreciation on the capitalized amount of Rs. 37,50,699/- at the rate applicable to the assets with which the above amount is to be capitalized. As a result, ground no. 3 is partly allowed." 6. As is evident from the above, the basis with the Revenue authorities for treating the expenses to the tune of Rs. 37,50,699/- as capital in nature, is noting the description that this expenditure was incurred for replacement of machinery part, and consistently, the Revenue authorities have held that since as per the provisions of law contained in section 31 of the Act, dealing with allowability of repai....