2012 (3) TMI 581

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..... facts of the case are that original assessment was completed u/s 143(3) on 24.12.2007 accepting the returned income. The ld. CIT, from the perusal of the assessment records, found that in Column No.17(a) of the Audit Report in Form 3CD, an amount of ₹ 10,35,717/- representing the cost of machinery replaced, was reported as 'expenditure of capital nature' and that the same was debited in the Profit Loss Account. According to the ld. CIT, the item of capital expenditure was clearly hit by section 37 of the Act and hence, was not an allowable expenditure. He, therefore, issued notice u/s 263 of the Act and by passing an order u/s 263 of the Act, directed the Assessing Officer to add ₹ 10,35,717/- to the income of the ass .....

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..... The assessee replaced the old Electrical Control Panel with a new Control Panel. Further, the assessee incurred ₹ 68,013/- on an Induction Melting Furnace for installing a Cooling Tower for cooling water as the one under use was old and outdated and could not be put into use any more and its efficiency was also reduced requiring replacement. Further the assessee incurred expenditure of ₹ 1,39,566/- on an EOT crane which was more than 35 years old and the hoist of the crane was being regularly maintained and used. The hoist could not be put into use any further and needed replacement. Therefore, a new wire rope hoist was procured to replace the same. The assessee incurred expenditure of ₹ 2,02,566/- on EOT crane used for ha .....

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..... IT held the order of the Assessing Officer as erroneous and prejudicial to the interests of the Revenue by observing as under: 3 The submissions of the assessee have been considered carefully. It is clear that the replacement of these items of machinery did not result in the creation of a short term advantage to the assessee. On the other hand, it gives the purchaser an enduring benefit of better and more efficient production over a period of time. Thus, replacement of machinery, as in the instant case, cannot be classified as revenue in nature. Hence, the assessee's claim of deduction u/s.37 is not tenable. As regards, the contention, raised in the course of hearing, that the expenditure is more or less in the nature of repairs, it .....

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