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TMI Blog2019 (3) TMI 633X X X X Extracts X X X X X X X X Extracts X X X X ..... AO noticed that the assessee had claimed as deduction a sum of Rs. 39,81,198 on account of repairs to machinery. The details of items of machinery to which repairs were carried out by the assessee, the year of purchase of the machinery, consideration paid at the time of purchase and quantum of expenditure incurred as repairs on those machines has been tabulated by the AO in the form of a chart which is as follows:- Sl. No Description Year of Purchase Consideration at the time of purchase WDV as on 01.04.2011 Amount incurred during the F.Y. 2011-12 Remarks 1 Machinery Spares (Outside Local Area) 2008-09 1,51,31,700 92, 92,755 31,75,000 Claimed as Revenue expense 2 Machinery Spares (Outside Local Area) 2008-09 6,91,990 4,62,466 1,00,000 Claimed as Revenue expense 3 Machinery Spares (Outside Local Area) 2007-08 9,86,904 5,60,626 2,10,000 Claimed as Revenue expense 4 Machinery Spares (Outside Local Area) 2007-08 - 12,42,652 7,05,908 97,300 Claimed as Revenue expense 5 Machinery Spares (Outside Local Area) 2007-08 35,38,411 20,10,050 45,000 Claimed as Revenue expense 6 Machinery Spares (Outside Local Area) 2000-01 65,46,609 1,123,894 90,80 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was a machinery which was manufactured in the year 2008. This was purchased by the assessee as a second-hand machine in the year 2008-09. The WDV of this machinery as on 1.4.2011 was Rs. 92,92,755 on which expenditure on repairs was Rs. 31,75,000. A copy of the bill evidencing purchase of parts for this machine is at page 142 of PB and it gives the following description:- "Hydraulic system with Electrical Control Panel for 630T Fine Blanking Press." 8. The CITA gave the following findings:- "This machine is not a single unit but is made up of several parts. Thus, in the first year the assessee claimed depreciation of Rs. 1,51,31,700/- which consisted of several parts, in its first year of operation. Only then the assessee started deriving enduring benefit. During the accounting period 2011-2012 this machinery could not operate. The assessee found that one of the parts had to be replaced without which the machinery could not function. It is only after replacement that the machinery started functioning and an advantage was derived from this machine. This machine being congregation of several parts started functioning and enduring benefit was derived only after the replacement of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al meaning of the expression "current repairs". In other words, even if the expenditure is revenue in nature, it may not fall in the connotation of "current repairs" [2007] 293 ITR 201 (SC) (Commissioner of Income Tax Vs. Saravana Spinning Mills P. Ltd.) (iii) A new asset or new/different advantage cannot amount to `current repairs'. - 2009-TIOL-86-SC-II (CIT Vs. Sri Mangayarkarasi Mills P. Limited) (iv) Repair implies existence of a part of the machine which has malfunctioned, thereby requiring repair to that machinery, plant etc. Replacement cannot be a current repair, for, "replacement" and "current repair" do not go hand in hand. If one is to hold otherwise, it would only make Section 31(i) wholly redundant and absurd. Thus, replacement expenditure cannot be said to be `current repairs' vide [2007] 293 ITR 201 (SC) (Commissioner of Income Tax Vs. Saravana Spinning Mills P. Ltd.) and 2009-TIOL- 86-SC-II (CIT Vs. Sri Mangayarkarasi Mills P. Limited) (v) Expenditure is deductible under section 37 only if it (a) is not deductible under sections 30-36, (b) is of a revenue nature, (c) is incurred during the current accounting year and (d) is incurred wholly and exclusively for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ward (Exports-Air) 24,32,489/- Sales by Air Transport 4 Transport Outward (Export- Sea) 15,70,513/- Sales by Sea Transport 71,76,751/- 13. Admittedly, the assessee did not deduct tax at source on the payments made to the transporters. The AO was of the view that under the provisions of section 194C of the Act, payment in question was a payment for carrying out of works for which assessee ought to have deducted tax at source on such payment. Since the assessee failed to deduct tax at source, the AO was of the view that the amount claimed as deduction while computing income on account of transport charges should be disallowed and added to total income of assessee u/s. 40(a)(ia) of the Act. 14. The assessee submitted that it had obtained declaration from all the transporters who were engaged for the purpose of transportation to the effect that the sum in question was paid to them in the course of their business of plying goods carriages along with their PAN. According to the provisions of section 194C(6) of the Act, if such a declaration is obtained, a person making payment need not deduct tax at source. After the amendment by Finance Act, 2015 w.e.f. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... having noticed that assessee had not deducted tax at source on such payments disallowed same under section 40(a)(ia) - Assessee contended before Commissioner (Appeals) that because of provision of section 194C(6), she was not liable to effect TDS on payments to transporters who had submitted their PAN and those PAN and addresses of transporters were filed before Assessing Officer - Commissioner (Appeals) held that benefit under section 194C(6) was available only when assessee fulfilled conditions laid down in section 194C(7) and since assessee had not fulfilled conditions, Assessing Officer was justified in disallowing said payments - Whether from reading of provisions of section 194C it follows that if assessee complies with provisions of section 194C(6), no disallowance under section 40(a)(ia) is permissible, even though there is violation of provisions of section 194C(7) - Held, yes - Whether since assessee had submitted PAN and addresses of transporters before Assessing Officer and thus complied with provisions of section 194C(6), no disallowance under section 40(a)(ia) was permissible - Held, yes [Paras 34 and 35][In favour of assessee]" 18. In the light of the aforesaid deci ..... X X X X Extracts X X X X X X X X Extracts X X X X
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