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TMI Blog2015 (1) TMI 430X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the expenditure incurred, the replacement of a part of an existing machinery would constitute current repairs, and such expenditure cannot be treated as capital expenditure; and that in the name of causing repairs, an assessee shall not be entitled to bring an altogether a new asset, into existence. - The mere fact that the new parts are different from those that were replaced, in terms of cost, or efficiency; by itself does not lead to the conclusion that the assessee has acquired new item of machinery. It is not uncommon that the parts of an item of machinery, which is an independent unit, have different efficiency and endurance. Though the new part, which replaced the old one, in a machinery, is costlier and more efficient, it would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned Junior Standing Counsel, assisting Sri J.V.Prasad, learned Senior Standing Counsel for the appellant, submits that the Assessing Officer has analysed the relevant facts and applied the correct principles of law in disallowing the deduction and that the Commissioner and the Tribunal have taken a different view. She contends that the respondent itself has treated the cost of replacement of Conors in an earlier assessment year, as capital expenditure and there was no basis for it to claim it as expenditure towards repairs i.e. revenue expenditure, for the assessment year 1995-96. She has placed reliance upon the judgment of the Supreme Court in Commissioner of Income Tax v. Sri Mangayarkarasi Mills Private Limited 315 ITR 115 (SC) and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of premium of insurance. What constitutes current repairs was explained by various Courts. The Bombay High Court in Commissioner of Income Tax v. Chowgule and Co. (P) Ltd. 214 ITR 523 identified about 8 parameters, in this behalf. The gist thereof is that irrespective of the expenditure incurred, the replacement of a part of an existing machinery would constitute current repairs, and such expenditure cannot be treated as capital expenditure; and that in the name of causing repairs, an assessee shall not be entitled to bring an altogether a new asset, into existence. In Sri Mangayarkarasi Mills Private Limiteds case (1 supra), the Honble Supreme Court held that, where an industry, comprises of several machines, each devoted to an indep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; by itself does not lead to the conclusion that the assessee has acquired new item of machinery. It is not uncommon that the parts of an item of machinery, which is an independent unit, have different efficiency and endurance. For example, an ordinary tyre of a car, may cost less, and its service and endurance may be relatively low compared to a radial tyre, whose cost is fairly high. Same is the case with fuel injection systems. Instances are not lacking, where certain companies supply the LPG fuel systems, in the place of the conventional fuel systems and if fitted to a vehicle, the fuel efficiency may increase. Though the new part, which replaced the old one, in a machinery, is costlier and more efficient, it would not lead to an infere ..... X X X X Extracts X X X X X X X X Extracts X X X X
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