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TMI Blog2015 (8) TMI 377X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act on account of delayed contribution of ESI, provident fund ("PF") and superannuation fund. 3. As regards the deletion of the addition of Rs. 30,450 relatable to the delayed contribution of ESI and PF, the Court declines to frame a question since the sum is insubstantial. The question is left open for the consideration in the appropriate place. 4. As regards the deletion of the addition pertaining to the delayed contribution of Rs. 46,40,822 on account of the superannuation fund, the Court has been shown a copy of the Employees' Superannuation Scheme of the Respondent-Assessee. Clause 6 of Section-II is titled "Contributions and Annuities". Clause (a) envisages the payment of contribution by the employer and not by the employee. Clause (d) clearly states that "the employer shall be liable to pay the total contributions under the Scheme and shall pay the entire contributions to the Trustees in one or more instalments as the case may be." The remaining clauses of Section-II also envisage payment of expenses of scheme by only the employer. In other words, there is no question of employee's contribution under the Scheme in question. Consequently, the Court finds that ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oceedings the Assessee furnished invoices dated 15th September 1999 and 12th October 2000 for purchase of "one heavy duty internal (Banbury) mixer G.K. 255N" and purchase of "reduction gear box for 3 roll calendar" respectively. The Assessee also furnished a Bill of Entry (B/E) dated 3rd November 2000 corresponding to the aforementioned invoice dated 15th September 1999 in respect of the Banbury internal mixer G.K. 255N. 11. The AO in his order dated 19th December 2008 noted that no other documentary evidence was produced by the Assessee. The AO after examining the documents and the written submissions noted that the Assessee had described the machines as "part of the tyre manufacturing plant', 'vital part of the process of manufacture of tyres' and 'equipment for mixing the rubber and chemical". The AO concluded that the Assessee was unable to establish that the said machines were part of some other machines. The AO also rejected the claim of the Assessee that the expenditure was incurred on "current repairs". It was concluded that the expenditure was "capital expenditure" and depreciation as per the rules would be allowed to the Assessee. 12. The above order dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... endar 41,23,890 The 3 Roll calendar is one of the vital part in the process of manufacturing of tyres. It is used for the treatment of fabric and it plays vital role in ensuring the smooth production and quality parameters and is single unit in the entire plant. Any breakdown in the plant would lead to total stoppage of production line. Therefore, the regular up keep and maintenance of this machinery is of paramount importance. The aforesaid expenditure on gear box and the Roll were incurred keeping in mind the aforesaid. 3. Banbury F-370 33,71,850 F 370 is the major equipment and is used for mixing the rubber and chemical on regular basis and needs to be kept in perfect condition to ensure uninterrupted production and quality parameters. 15. In the same letter, the Assessee further stated as under: "It will kindly be appreciated that all the aforesaid expenditure were incurred by the Assessee for the maintenance and upkeep of the machinery and replace the old and worn out parts of plant and machinery, which was necessary for keeping the machines in working order. It is further respectfully submitted, that no new asset came into existence by incurring of the said ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... There was sufficient opportunity to the Assessee to produce before the AO in the remand proceedings, sufficient documentation to substantiate its plea that what was imported was only the body of the mixer. The Assessee however, failed to do so. 21. Turning to the decisions on when the cost of import of an equipment could be treated as 'repairs and maintenance', and therefore whether of a capital or revenue nature, in CIT v. Saravana Spg. Mills (P) Limited (2007) 293 ITR 201 the Supreme Court was dealing with the issue whether a ring frame in a textile mill was an "independent and separate machine". It was held that each machine in a textile mill may be part of the integrated process of manufacture of yarn and integrally connected to the other machines in the mill for production of the final product. However, such interconnection did not take away the independent identity and distinct function of each machine. Accordingly, it was held that each machine in a textile mill was required to be considered independently. As regards the question whether a particular item of expenditure amounted to expenses towards "current repairs" the Supreme Court explained that the question to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd ITAT holding it to be revenue expenditure and deleting the disallowance of the AO. 25. The conclusion as far as the second question projected by the Revenue is that ITAT erred in deleting the disallowance of the expenditure on the purchase of Banbury mixers as "repair and maintenance". The said expenditure on the import of the two Banbury mixers is required to be treated as capital expenditure. It is further held that the ITAT and the CIT (A) were right in deleting the disallowance of the expenditure on the reduction gear forming part of the 3 Roll calendar to the extent of Rs. 41,23,890. 26. The third and final issue projected by the Revenue pertains to deletion of the notional interest of Rs. 24 lakhs which was sought to be added by the AO on the ground that an interest free loan of Rs. 2 crores was given by the Assessee to its sister concern, Modi Stone Limited. 27. In this regard it is seen that the ITAT noted that the sum of Rs. 2 crores was advanced to Modi Stone Limited on account of commercial expediency as the said company was declared sick by the BIFR by its order dated 15th April 1998. No interest was accrued on the above amount. From a perusal of the financial sta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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