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TMI Blog2019 (4) TMI 621X X X X Extracts X X X X X X X X Extracts X X X X ..... ry in the AY 2010-11 and 31.58% in A.Y.2011-12, meaning thereby, by way of this method, almost 92% expenditure were incurred in two years on the value of the plant & machinery. It amounts to replacement. CIT(A) in this background has rightly observed that other companies in similar line were incurred expenditure to the extent of 2% to 6%, whereas the assessee has incurred expenditure at 43%. CIT(A) rightly upheld disallowance of expenditure partly by treating it in the capital field. - Decided against assessee - ITA No. 1725/Ahd/2017 - - - Dated:- 8-4-2019 - Shri Rajpal Yadav, Judicial Member And Shri Waseem Ahmed, Accountant Member For the Assessee : Shri Mukund Baxi, AR For the Revenue : Shri G.C.Daxini, Sr.DR ORDER PER RAJPAL YADAV, JUDICIAL MEMBER : Assessee is in appeal before the Tribunal against order of the ld.CIT(A)-1, Vadodara dated 28.4.2017 passed for the Asstt.Year 2013-14. 2. In ground no.1, the assessee is aggrieved by the action of ld.CIT(A) in confirming disallowance of payment of ₹ 40,895/- towards Employee s Contribution on the ground that the same was not deposited in the relevant fund on or before the due date. 3. Brief ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der in ITA No.549/Ahd/2016 and others dated 11.3.2019. The discussion made by the Tribunal in the Asstt.Years 2010-11 and 2011-12 on this issue reads as under: 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 facts of the case are that the assessee has filed its return of income on 30.9.2011 declaring tota ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... satisfied 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 MS steel plates, angles, shapes, bars, flanges etc. the AO has made a detailed analys ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 seaworthy, if certain expenditure were incurred, then that would not result in increase of capacity of vessels or any new advantage o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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