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TMI Blog1986 (8) TMI 135X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the expenditure incurred will result in the improvement of the quality of yarn and thus an enduring benefit is obtained by the assessee. If some expenditure is incurred to replace small parts of machinery such expenditure is not allowable as revenue expenditure. The expenditure allowable has been incurred for modernisation of the mill and to enhance its output and to increase its productivity in later years. Thus the expenditure of capital nature. If their is substantial replacement of the existing capital asset the expenditure incurred for such replacement will not be allowed as a deduction for repairs or replacements. Thus he disallowed the assessee's claim in all these years. The assessee appealed to the CIT (A). He accepted the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has found as under: "I have gone through the details of the items purchased, the costs of which were included in the total expenditure mentioned above. Out of the total expenditure of Rs. 19,82,021, for the asst. yr. 1976-77 the main items of expenditure were in respect of 10 frames of S.K.F. Drafting Materials costing Rs. 4,14,973. 45 frames of 10" Dia Aluminium Pulley Drive conversion material frames costing Rs. 4,13,409, 31 Lift conversion material frames costing Rs. 1,03,441, 14000 numbers of Ani wedge flanged solid steel frames costing Rs. 1,15,095, 35 sets of Metallic card clothing for MMC 1016 cards costing Rs. 1,85,285, and such other items. For the asst. yr. 1975-76 a major item of the expenses were in respect of 9072 spindles o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e replacement of the entire plant and machinery which was imported by the appellant from UK about three decades back. In the light of above High Court judgements and the Supreme Court decision in Mahalaxmi Textile Mills' case, I hold that the above items of expenses should be allowed as "current repairs" under s. 31 (i) or in the alternative as revenue expenditure under s. 37(1) of the IT Act." It is clear from the above details found in the order of the CIT (A) that the entire machinery has not been replaced. It is only the parts of the machinery which had become useless or wornout which were replaced. On account of the replacement of the useless or worn out parts the efficiency of the machinery has increased and the production also woul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hin the meaning of current repairs and hence was admissible as deduction under s. 31. It was further held that 'repairs' means restoration by replacement of subsidiary parts or the whole and repairs may be small or major and if it is a major repair it may involve considerable amount of money but the money spent alone cannot be factor to determine whether the expenditure falls under current repairs or not and it is the nature of the repairs carried out by the assessee that matters for grant of deduction. It was further held that if the amount is spent for preserving and maintaining the present asset in existence it cannot be said that the expenditure so incurred is capital in nature. In CIT Madras vs. Mahalakshmi Textile Mills Ltd. (1967) 66 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igh Court held that a sum can be allowed as cost of repairs even though the expenditure in a particular year is heavy on account of the fact that it is undertaken to remedy the effect of several years of wear and tear or neglect and also in spite of the fact that such expenditure may not be necessary for several years to after repairs have been effected. In that case it was held that the expenditure incurred by substituting asbestos cement in place of worn out corrugated iron sheets was not of capital nature. In CIT vs. Salem Co-operative Spinning Mills Ltd. (1983) 37 CTR (Mad) 146 : (1984) 148 ITR 176 (Mad) the assessee incurred expenditure for replacement of conventional card clothing by metallic card clothing in the carding section of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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