Section 30 - Rent, rates, taxes, repairs and insurance for buildings

Section 31 - Repairs and insurance of machinery, plant and furniture

Income-tax Act, 1961

All About “Current Repairs”

Current Repairs – Though there’s no specific definition as per the Income Tax Act, 1961. We generally assumed it is for the repairs of ‘Building’ & ‘Plant & Machinery.’

Section 30 & 31 of Income Tax Act, 1961 provides for the treatment of Current/Revenue repairs of Building & Plant & Machinery. However, there’s always some confusion regarding ‘Nature & Treatment’ of expense, so beneath are some of the latest judgements for clarification as per the courts.

• Expenditure on construction and renovation in a leasehold premises – substantial expenditure that leads to enduring benefit in the future to assessee shall not be considered as revenue expenses therefore, these are capital expenses. – “CIT Madurai. vs M/S. Viswams, Shri Rm K Viswanatha Pillai & Sons, M/S. Aremkay, M/S. Kajah Enterprises (P) Limited., Shri K. Sivakumar and Shri K.V. Nellaiyappan 2019 (4) TMI 1127 - Madras High Court”
• Expenditure on replacement of dies & moulds expenditure – Worn out parts replacement expenses are allowed as current expenditure under section 31. “CIT, Chennai. Versus M/S. TVS Motors Limited 2019 (3) TMI 499 - Madras High Court”
• Expenditure on replacement of part of composite machinery – In case of replacement of part of composite machinery which functions independently, has substantial period of life & identifiable and measurable cost then such replacement of part will be capitalized. “The DCIT, Madurai. vs M/S. Ramco Industries Limited and M/S. Ramco Industries Limited vs ACIT, Circle 1, Virudhunagar. 2020 (2) TMI 921 - ITAT Chennai.”
• Expense on abandoned project - For creation of “Logo of the company”, when no new intangible asset is formed must be treated as revenue expense as per section 37 of Income Tax Act, 1961. It was held in the case “Claridge Hotels Pvt. Ltd. versus DCIT, Central Circle-3, New Delhi 2022 (7) TMI 269 - ITAT Delhi.”

 

 

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Full Text:

Section 30 - Rent, rates, taxes, repairs and insurance for buildings

Section 31 - Repairs and insurance of machinery, plant and furniture

Current repairs classification distinguishes capital expenditure from revenue deductions for building and machinery repairs under income tax rules. Classification of current repairs determines whether expenditures on buildings and on plant and machinery are revenue deductions or capitalised: enduring benefit or substantial enhancement is capital, while routine restorative or replacement outlays that merely maintain existing earning capacity are revenue; Sections 30 and 31 provide the statutory context for rent, rates, taxes, repairs and insurance for buildings and for machinery, plant and furniture.