SC: Hindu Daughter-In-Law Widowed After Her Father-In-Law’s Death is Entitled to Maintenance  ||  SC: Vendor Remains a Necessary Party in Specific Performance Suits Even After Transferring Property  ||  Raj HC: Having Different Age Criteria For Contractual and Regular Appointments is Unconstitutional  ||  Delhi HC: Registered Property Title Prevails over Claims Based on Oral Family Settlements  ||  Gauhati HC: Only A Family Court Can Grant A Divorce under Muslim Law, Not A Civil Judge  ||  Del HC: Courts Cannot Compel Lawyers to Disclose Sources of Documents Filed on Clients' Instructions  ||  SC Explains When Shares Received After Company Amalgamation are Taxable as Business Income  ||  SC: Excavators, Dumpers Etc Used Within Factories aren’t Motor Vehicles For Road Tax Purposes  ||  SC: Complaints Alleging Fraud under Companies Act Can Be Filed Only By SFIO, Not By Private Parties  ||  SC: Preventive Detention Cannot Override Bail and Requires Proof of a Threat to Public Order    

Shree Sulphurics Private Limited vs. Assistant Commissioner Of Income Tax - (Income Tax Appellate Tribunal) (09 Jun 2023)

Disallowance is not sustainable as repairs to machineries is not capital expenditure

MANU/IB/0267/2023

Direct Taxation

Present appeal has been filed by the assessee against order passed by the learned Commissioner of Income Tax (Appeals) ["CIT(A)"] confirming the disallowance of repairs to machineries of Rs.37,50,699 on the ground that it is capital expenditure and therefore the learned AO should be directed to delete the said disallowance while computing the total income.

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.

Merely because the description of expenditures states to be replacement of certain parts or machinery, it cannot lead to the conclusion that the expenditure was not for the purpose of maintaining or preserving of an asset, and it resulted in creation of a new asset or new advantage to the assessee. The assessee had explained that it was in the business of manufacturing various acids which corrodedits plant and machinery speedily, and therefore, its plant and machinery needed to be repaired and part of it replaced so as to maintain its working capability. Further, it is also fact on record that, the assessee had incurred huge expenses to the tune of Rs.2.68 crores towards repairs and maintenance of plant and machinery and expenses only to the extent of Rs.37.50 lakhs have been found to be capital in nature.

Present Tribunal is not in agreement with the Revenue that expenses to the tune of Rs.37.50 were not in the nature of current repairs to be allowed in terms of Section 31 of the Income Tax Act, 1961 (IT Act) particularly when the assessee had explained that considering the nature of manufacturing done by it, machinery parts corroded frequently warranting their replacement so as to maintain the machineries in working condition, which has not been controverted by the Revenue. And the finding of the Revenue of the expenses being capital in nature /noncurrent is based on mere description of the expense as replacement of certain machinery with no facts emanating from the records to substantiate the same. There is no reason to uphold order of the learned CIT(A) confirming the disallowance of repairs and maintenance expenditure to the tune of Rs.37,50,699. The appeal of the assessee is allowed.

Tags : ASSESSMENT   DISALLOWANCE   LEGALITY  

Share :        

Disclaimer | Copyright 2026 - All Rights Reserved