2021 (12) TMI 1087 - HC - Income Tax

Expenditure on replacement of dies and moulds allowed as current repairs - HELD THAT - As decided in M/S. TVS MOTORS LIMITED 2014 (2) TMI 522 - MADRAS HIGH COURT Expenditure on replacement of dies and moulds are to be allowed as cur rent repairsReplacement of the new dye in the place of old dye would qualify for current repairs under Section 31 of the Act - The decision in CIT Vs. Sri Mangayarkarasi Mills P.Ltd 2009 (7) TMI 17 - SUPREME COURT followed - what is allowable as revenue expenditure under Section 37 of the Act are those expenditure other than one falling for consideration under Sections 30 to 36 of the Act - when the picture tube in a television set is replaced such repairs would come within the connotation of the phrase current repairs thus the claim being considered as current repairs the same would fall under Section 31 of the Act as current repairs - Decided against revenue.

Summary

Issues:
1. Interpretation of whether expenditure on replacement of dies and moulds qualifies as current repairs under Section 31 of the Act.

Analysis:
The High Court of Madras addressed the issue of whether the expenditure on replacement of dies and moulds should be considered as current repairs under Section 31 of the Act. The appellant, the Revenue, challenged the order of the Income Tax Appellate Tribunal regarding the assessment year 2001-02. The Court admitted the appeal on the substantial question of law related to the correctness of the Tribunal's decision on the expenditure in question.

The Court referred to a previous judgment dated 09.01.2014, where it was established that the replacement of dies and moulds was considered revenue in nature. The Tribunal had ruled that even though dies and moulds were not classified as plant and machinery, their replacement was not akin to installing machinery in the factory. The Court further cited relevant case laws to determine the nature of the expenditure incurred on replacement of machinery parts, emphasizing the distinction between revenue and capital expenditure.

The Court highlighted the criteria for determining current repairs under Section 31 of the Act, emphasizing that the expenditure must be for preserving and maintaining an existing asset, not for creating a new asset or advantage. It was noted that replacement cannot be equated with current repair, as they serve different purposes. The Court also referenced a decision on repair made to a ship, emphasizing that expenditure not aimed at obtaining a new asset qualifies as current repairs under Section 31 of the Act.

Based on the analysis of the facts and legal principles, the Court concluded that the replacement of dies and moulds attached to machinery for manufacturing specific products should be considered as current repairs falling under Section 31 of the Act. The Court upheld the assessee's claim, dismissing the Revenue's appeal and modifying the Tribunal's order accordingly. The substantial question of law was answered against the Revenue, leading to the dismissal of the Tax Case Appeal without costs.