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TMI Blog2019 (4) TMI 576X X X X Extracts X X X X X X X X Extracts X X X X ..... y error in the order of the CIT(A) in both years on this issue. An alternative contention has been raised that in case expenditure is not allowed as revenue expenditure, then depreciation on the disallowed amount be granted to the assessee. We remit this aspect to the file of the AO. He will work out and grant depreciation to the assessee on the addition made by disallowing the current repairs. This alternative contention of the assessee is accepted. - Decided partly in favour of assessee. - ITA No.549/Ahd/2016, 599 and 600/Ahd/2016 Asstt.Year 2010-11 and 2011-12 - - - Dated:- 11-3-2019 - Shri Rajpal Yadav And Shri Amarjit Singh, JJ. Assessee by: Shri Mukand Bakshi, AR Revenue by: Shri B.L. Meena, Sr.DR ORDER Rajpal Yadav, In the Asstt.Year 2010-11 assessee and the Revenue are in cross appeals against order of the ld.CIT(A)-1, Vadodara dated 3.12.2015, whereas in the assessment year 2011-12 assessee alone is in appeal against the order of the ld.CIT(A) dated 3.12.2015. 2. As far as appeal of the Revenue is concerned, the ld.counsel for the assessee at outset submitted computation sheet showing that by virtue of relief granted by the ld.CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect is more or Revenue s case falls within the ambit of exceptions provided in the Circular, then the Department will be at liberty to approach the Tribunal for recall of this order. Such application should be filed within the time period prescribed in the Act. 5. Now we take appeals of the assessee for the assessment years 2010- 11 and 2011-12. 6. Assessee has taken four grounds of appeal in each assessment year. In brief, its sole grievance is that the ld.CIT(A)has erred in confirming the disallowance of ₹ 39,53,249/- out of ₹ 52,70,999/- and disallowance of ₹ 28,55,917/- out of ₹ 38,07,890/- in the Asstt.Year 2010-11 and 2011-12 respectively by treating them as unexplained expenditure incurred in the capital field instead of treating them in the revenue account for repairs and maintenance to plant machinery. The facts on all vital points are common in both the assessment years. Basically, the ld.CIT(A) has passed order in the Asstt.Year 2011-12 and that order has been followed in the Asstt.Year 2010- 11. Though both orders have been passed simultaneously, therefore, for the sake of reference we take facts from the Asstt.Year 2011-12. 7. Brief f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y treated the expenditure to the extent of ₹ 52,70,999/- in the capital field. Dissatisfied with the action of the AO, the assessee carried the matter in appeal before the ld.CIT(A). It has reiterated its stand and pointed out nature of plant machinery as well as nature of its manufacturing activity. According to the assessee, its plant and machinery is quite old, which has given rise to a lot of wear and tear and therefore continuous replacement of fire bricks, SS and MS plates and other accessories. The ld.CIT(A) has called for remand report from the AO because the assessee has submitted certain new details. Thereafter he recorded a finding that repairs carried out by the assessee is to the extent of 43% of the plant machinery which amounts to major replacement and construed as bringing of a new asset. He accordingly disallowed 25% of the expenditure out of the total claimed by the assessee. The finding recorded by the ld.CIT(A) reads as under: 5.3. I have considered the facts of the case, observations of the AO as well as remand report and the submissions of the appellant The expenditures disallowed by the AO as revenue expenditures are in the nature of purchase of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9. Before us, the ld.counsel for the assessee reiterated his contentions as were raised before the AO. On the other hand, the ld.DR relied upon the orders of the Revenue authorities. 10. Section 31 of the Income Tax Act provides allowance of expenditure towards current repairs to the plant machinery and furniture as well as insurance expenditure incurred upon it. It contemplates that expenditure for repairs shall be on account of current repairs and shall not include any expenditure in the nature of capital expenditure. Thus, if an assessee has carried out necessary repairs, which falls within the category of current repairs, then the expenditure would be allowed to the assessee. In the case of CIT Vs. Sesa Resources Ltd., 250 taxmann.com 182, Hon ble Bombay High Court found that the assessee was engaged in mining and mineral process for exports, shipping and stevedoring. The assessee had incurred expenditure on repairs of two marine vessels which has been disallowed, but the ld.CIT(A) treated such repairs as current repairs, and it was allowed. Hon ble High Court has observed that in order to keep the vessel sea-worthy, if certain expenditure were incurred, then that wou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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