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TMI Blog2012 (12) TMI 79X X X X Extracts X X X X X X X X Extracts X X X X ..... nd in the circumstances of the case, the Income Tax Appellate Tribunal is right in law in non-considering and in rejecting the appellant's claim that the expenditure on iron rolls is revenue in nature and hence allowable in full ?" 2. The assessee herein is engaged in manufacturing steel re-rolls. In the course of assessment proceedings, the assessee claimed that the iron rolls acquired and put to use were entitled to be granted 100% depreciation. The Assessing Officer pointed out that the machines were purchased after 17.10.1991 and they were put to use for less than one hundred and eighty days. Thus, the assessee was entitled to depreciation to 50% only. 3. The assessee filed revised return thereupon and requested that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her pointed out that there was no increase in the capacity of production, it was only replacement of worn out of a part of the machine. The Appellate Authority, however, rejected the assessee's contention and affirmed the view of the Assessing Officer of granting 50% of the depreciation. Aggrieved by this, the assessee went before the Income Tax Appellate Tribunal. 5. Reiterating its stand, the expenditure on replacement of iron roll is only as revenue expenditure, the assessee contended that the reasoning of the Commissioner of Income Tax (Appeals) was not sustainable in law. Pointing out to the iron rolls used at high temperature of 1200o C, the assessee pointed out that the life span of these rolls had to be taken into account wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pointed out that the process of the manufacturing involved in the assessee's operation were explained to the Tribunal. She pointed out that iron ingots are pushed by a pushing machine into a reheating furnace, where they are heated to temperatures of upto 1200o C and the steel rollers produced the friction in the process of rolling between the hot iron and steel rollers. In this process, the rollers suffered serious damage necessitating replacement within short span of time. Thus, learned counsel submitted that when such an argument was placed before the Income Tax Appellate Tribunal, the reliance placed on by the Tribunal on the statement of the Managing Partner is not justified. 8. In this connection, learned counsel for the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hine part with new one bringing into existence a new asset giving enduring benefit is expenditure, which is capital in nature. In the case of Commissioner of Income Tax Vs. Ramaraju Surgical Cotton Mills reported in (2007) 294 ITR 328 (SC), the Supreme Court considered the decision in the case of CIT Vs. Saravana Spinning Mills P.Ltd reported in (2007) 293 ITR 201 (SC) and in the case of CIT Vs. Janakiram Mills Ltd reported in (2005) 275 ITR 403 and pointed out that in considering whether the expenditure is revenue or capital in nature, the proven tests have been evolved that if the expenditure is of the nature not leading to the increased production capacity and the same remaining as constant, even after replacement, then, the expenditure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Managing Partner and held that the assessee had no objection to treat the rolls as depreciable assets. 12. When a specific question was raised before the Income Tax Appellate Tribunal as regards the nature of expenditure, the Tribunal should have adverted to the issues raised viz., to consider whether the expenditure was, in fact, a "revenue" or "capital expenditure". 13. Given the technicalities on the "revenue" and "capital expenditure", "current repairs" and its application to a finding based on facts, we feel that the Assessing Officer should have adverted to the various facts involved in the use of steel rolls to arrive at the decision as to whether the assessee is entitled to deduction under Section 37 of the Act or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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