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TMI Blog2001 (5) TMI 135X X X X Extracts X X X X X X X X Extracts X X X X ..... cold repairs of the furnace. Before the Assessing Officer the assessce explained that the furnace in which the figured and wired glass are manufactured works at 1450'. This furnace worked upto 18-3-1991 and after that it was left for cooling down. As per the details submitted before the Assessing Officer, the assessee purchased raw materials for the construction of furnace like refractories, cement, steel etc. upto 31-3-1991 and the construction work was started from 31 st March, 1991 and completed on 19-4-1991 i.e. in the accounting year relevant to the succeeding assessment year 1992-93. The assessee submitted a report of Shri V.H. Daniel, a technical expert under whose supervision the construction work was carried on which reads as under:-- "As per the planning programme and schedule, closing down (stopping of production) of the furnace was done on 18-3-1991 i.e. 17th night at 11.00 p.m. and glass draining started at 12.00 midnight. About 40 per cent of glass was drained out during night shift. On 18th till 22nd of March, furnace cooling and dismantling was done. From 22nd March till 30th March, 1991 the following work has been carried out. (1) Dismantling of annealing lehr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nbsp; 5,62,310 -------------- 4,21,35,886 -------------- ------------------------------------------------------------------------------ Before the Assessing Officer the assessee submitted that since the refractories, cement, steel etc. are not items of stores and spares, these should be allowed as revenue expendi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he expenses do not fall for consideration in assessment year 1991-92 since the assessee's method of accounting of consumable stores involves debits of the items of stores to the P & L a/c. as and when they are consumed/used and closing balance of stores has been shown on the last day of the accounting year, the assessee cannot be allowed to claim deduction of cost of refractories, cement, steel etc. merely on the basis of purchase thereof. 7. On the second question concerning the nature of expenses, the learned Sr. D.R. very vehemently asserted that the assessee as dismantled the old furnace and constructed a new furnace incurring capital expenditure of Rs.4,21,35,886 in the process. Such expenses are capital in nature. The decision of Calcutta High Court in the case of CIT v. Hindusthan Pilkington Glass Works Ltd. [1994] 73 Taxman 631 has been strongly relied upon by the learned D.R. in support of his contention. The learned Sr. D.R. referred to the observations of Their Lordships in para 23 of the judgments wherein it has been observed that the very fact that the assessee demolished the old furnace and constructed new furnace in its place takes out the case from the pale of repa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conclusion of the learned CIT(Appeals) in treating the expenses as revenue expenditure be reversed. 8. Shri J.P. Shah, the learned counsel for the assessee on the other hand, supported the conclusion of the learned CIT(Appeals) and cited the English decision in the case of Samuel Jones & Co, (Devonvale), Ltd. v. Commissioner of Inland Revenue (sic) 32 Taxman 513. In this case, the cost of replacing the old Chimney in the factory of the assessee was treated as revenue expenditure. Shri Shah further referred to pp. 732 & 733 in Law and Practice of Income-tax-Taxman 1999 Vol. I wherein cluster of decisions on the issue have been indicated by the author. Shri Shah particularly referred to the Full Bench decision of Andhra Pradesh High Court in the case of Nathinal Bankatlal Parikh & Co. v. CIT [1980] 122 ITR 168 (AP) wherein replacement of old diesel engine of motor van by a new diesel engine has been held to be a revenue expenditure. Relying upon the ratio of aforesaid decision, Shri Shah pleaded that the expenses incurred by the assessee for dismantling the old furnace and construction of a new furnace would be revenue in nature and hence have been correctly allowed by the learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... early of capital nature. Reliance placed by the learned counsel for the assessee on various judicial authorities is entirely misplaced inasmuch as the facts and features of these cases are entirely distinguishable and, therefore, these decisions do not support the case of the assessee. In our opinion the decision of the Calcutta High Court in Hindusthan Pilkington Glass Works Ltd.'s case squarely applies to the facts and issue involved in the present appeal before us. Now we may refer to a few decisions cited by the learned counsel for the assessee in support of the assessee's case. In Samuel Jones &Co. (Devonvale) Ltd's case the facts were that a chimney in assessee's factory was replaced and the expenditure was held to be revenue on the ground that chimney is merely a subsidiary part of assessee's factory and replacement thereof is revenue in nature. In the instant case before us, it is a replacement of the furnace which constituted the main plant and machinery of the assessee utilised for its manufacturing activities. It is not merely a spare part or a subsidiary part which has been replaced due to wear and tear. In fact substantially the entire machinery has been replaced and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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