2005 (2) TMI 431

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....carrying the bread to the customers. The same had become old, junky and were giving trouble in handling due to bigger size and bulky in weight. The bread and wrappers used to get torn, therefore, the assessee replaced such old and worn out iron crates with plastic crates by incurring a cost of Rs. 6,22,000. The assessee claimed the same as revenue expenditure. However, the AO by relying on the judgment of Hon'ble Andhra Pradesh High Court in the case of CIT vs. Sri Krishna Bottles (P) Ltd. (1988) 71 CTR (AP) 88 : (1989) 175 ITR 154 (AP) and judgment of Hon'ble Rajasthan High Court in the case of CIT vs. Jai Drinks (P) Ltd. (1988) 68 CTR (Raj) 41 : (1988) 173 ITR 100 (Raj) and other cases reported in CIT vs. Steel City Beverages (P) Ltd. (19....

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....les Mill (P) Ltd. 1978 CTR (P&H) 1 : (1978) 112 ITR 441 (P&H), Nathmal Bankatlal Parikh & Co. vs. CIT (1980) 15 CTR (AP) 216 : (1980) 122 ITR 168 (AP) and some decisions mentioned on p. 4 of the order of the CIT(A), contended that the expenditure incurred on replacement of old machinery was a revenue expenditure. Accepting the submissions of the assessee, the learned CIT(A) held that the expenditure incurred was revenue in nature. He observed that initially the expenditure on purchase of iron crates was capitalised and depreciation was claimed as the iron crates were considered essential tools in the business of the assessee. The expenditure was incurred only for the replacement of old and worn out iron crates. The assessee had neither acqu....

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....ing bread from factory to its customers. Such iron crates were part of the plant and machinery used for manufacturing and marketing of bread. By replacing iron crates by plastic crates, the assessee has not acquired any new capital assets. Such expenditure is only for replacement of the part of the machinery being used in already existing business. It is not that the assessee had acquired these crates for setting up a new project or new business. Moreover, the expenditure incurred has not resulted in increasing the production capacity of the assessee. Therefore, the expenditure incurred on replacement of already existing machinery was revenue in nature. This view finds support from the various judgments relied upon by the learned counsel fo....