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TMI Blog2022 (8) TMI 671X X X X Extracts X X X X X X X X Extracts X X X X ..... n the instant set of facts, the revenue has not been able to independently bring anything on record to substantiate that any enduring benefit accrued to the assessee by way of incurring this expenditure on purchase of Rolling Mill Rolls. Accordingly, in our considered view, in the instant set of facts assessee is eligible to claim deduction of expenses as revenue expenditure. In the result, ground of the assessee's appeal is allowed. - ITA No. 1009/Ahd/2016 - - - Dated:- 27-7-2022 - Shri P. M. Jagtap , Vice President And Shri Siddhartha Nautiyal , Judicial Member Assessee by : Shri Ketan Shah, A.R. Shri Aman Shah, A.R. Revenue by : Shri Purshottam Kumar, Sr. D.R. ORDER Per Siddhartha Nautiyal, Judicial Member This is an appeal filed by the assessee against the order of the ld. Commissioner of Income Tax (Appeals)-1, Ahmedabad in Appeal no. CIT(A)-1/DCIT, Circle-1(1)(1)/702/2014-15 vide order dated 29/02/2016 passed for the assessment year 2012-13. 2. The assessee has taken the following grounds of appeal:- The following grounds are without prejudice to each other. The learned CIT(A)/AO, erred in 1. In not appreciating, the facts that, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re as revenue expenditure of the assessee is allowable in the instant set of facts. The Ld. Assessing Officer however rejected the assessee's contention and held that the assessee is eligible to claim depreciation on the rolling mills @80% and assessee is not eligible to claim deduction thereof as revenue expenditure. The AO made the following observations while passing the order: As per new Appendix-1 of Income Tax Rules, 1962 which is table of rates at which depreciation is admissible and which is effected from A.Y. 2006-07 onwards, it is found that vide SI. No. 111(8)(vii) of Part A (tangible assets) the depreciation at the @80% has been provided on iron and steel Industry - mills rolls. The item of the assesses is exactly the same 'for which it has claimed the expenditure in full, Further the steel rolls are clearly fixed assets and, for that reason, it has been mentioned in the Depreciation schedule. The periodical or frequent replacement does not make any capital expenditure as Revenue Expenditure where the replacement brings into existence and additional, benefit or advantage of an enduring nature which travels beyond a short period of time. Further, to hold e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enduring nature which travels beyond a short period of time. The judicial ratio cited by the appellant are not at all applicable to the facts of the case there is straight provision for the@80% has been provided on iron and steel Industry'- mills rolls. It's difficult to agree with the view of the appellant. The reasoning and the express provisions in this aspect leads to the conclusion that the stand of the AO is correct. The disallowance made by the AO is confirmed. The ground of the appellant is dismissed. 6. Before us, counsel for the assessee reiterated the arguments taken before the Revenue Authorities and reiterated that rolling mills are subject to frequent wear and tear and hence are eligible to be claimed as revenue expenditure under the head Repairs and Maintenance . He submitted that the case of the assessee is directly covered by the Calcutta Tribunal decision in the case of DCIT v. M/s. Jindal India Ltd. in I.T.A Nos. 368 369/Kol/2010, wherein on identical facts, the issue has been decided in favour of the assessee. Ld. Counsel for the assessee submitted that no enduring benefit accrues to the assessee and the expenditure is eligible to be claimed as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. The High Court held that Tribunal was justified in treating expenditure on purchase of rolls as revenue in nature. 9. We further note that the ITAT Kolkata in the case of M/S Akshay Steel Works Pvt. Ltd. vs DCIT, Cir-3, Kolkata in ITA number 823/Kol/2015 on identical facts has decided the issue in favour of the assessee with the following observations: 7.3 We have heard the rival submissions. We find that the assessee had installed one Rolling Mill for manufacture of rolled products i.e. Angles, Channels, Round Bar, Flat Bar, Square Bar, Octagonal Bar, Hexagonal Bar etc. In the rolling mill, the assessee uses 'Steel Rolls' which is an integral part of the machinery. In the process of manufacture of rolled products, the raw materials (mild steel billets/mild steel ingots) are fed into the heating furnace where it is heated at the requisite temperature. The red hot raw materials (ingots and billets) are then passed through a series of rolling stands fitted with steel rolls which keeps rotating and exerts pressure on the hot raw material which elongates the stock to desired shapes and sizes for manufacture of desired rolled products. In the process, the red hot raw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was treated by the assessee as revenue expenditure. The stand taken by the Assessing Officer/Revenue was that moulds have been classified as a capital asset specifically in the depreciation schedule in the Income Tax Rules, 1962 and the rate of depreciation is specified @ 40% and, therefore, the moulds are capital asset and purchase price of the moulds cannot be treated as revenue expenditure. ...... 5. The reasoning is fallacious; the schedule or rate of depreciation cannot decide whether a particular expenditure in the hands of an assessee is revenue or capital expenditure. Same asset can be stock in trade in the hand of one assessee and a capital asset in hands of another assessee. The schedule does not decide whether an asset purchased is a capital asset. Merely because moulds have been classified and mentioned in the schedule relating to depreciation in the Income Tax Rules, it does not mean that the purchase price of the moulds in all cases has to be treated as a capital expenditure. It would depend upon the facts and circumstances of each case whether the purchase price of moulds is to be capitalised or treated as revenue expenditure. Purchase price of moulds canno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed without any order as to costs. 11. In view of the consistent position taken by various Courts/Tribunals, we are of the considered view that the assessee in the instant set of facts is eligible to claim deduction of expenditure on purchase of Rolling Mill Rolls as revenue expenditure. The only reason why the claim of a revenue expenditure of the assessee was sought to be disallowed was that since the Income Tax Act specified rate of 80% for claim of depreciation in respect of the above assets, the assessee was not eligible to claim the same as revenue expenditure. We note that in the instant set of facts, the revenue has not been able to independently bring anything on record to substantiate that any enduring benefit accrued to the assessee by way of incurring this expenditure on purchase of Rolling Mill Rolls. Accordingly, in our considered view, in the instant set of facts assessee is eligible to claim deduction of expenses as revenue expenditure. In the result, ground number 2 of the assessee's appeal is allowed. 12. In the result, the appeal of the assessee is partly allowed. Order pronounced in the open court on 27-07-2022. - - TaxTMI - TMITax - Income T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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