9911796707
TMI Blog1990 (10) TMI 104X X X X Extracts X X X X X X X X Extracts X X X X ..... investment allowance should also be granted. The grievance of the Departmentis that the CIT(A) has erred in partially allowing a sum of Rs. 67,075 out of the aforesaid expenditure. The summary of deduction claimed by the assessee under the head consumable stores and disallowance made by the ITO and relief allowed by the CIT(A) is as under: Total expenditure 2,41,530 Allowed by ITO 44,972 . 1,96,558 Dep., at 15% allowed by ITO 29,483 Effective disallowance 1,67,075 Relief by CIT(A) 67,075 Disallowance retained 1,00,000 2. The assessee is a registered firm carrying on the business of manufacture and dealers of acids and chemicals. The busin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which were fully consumed in the process of production during the year under consideration. Even if it is considered to be an item of plant, it is in the nature of replacement of old M.S. vessels and M.S. tank, etc., and such expenditure incurred by way of replacement is also clearly allowable as a revenue expenditure. He further submitted that no new extention or increase in he number of vessels was made at any time during the year under consideration as compared to the number of such M.S. vessels put to use in the preceding year. In the alternative he urged that if the amount of disallowance confirmed by the CIT(A) is treated as capital expenditure, depreciation for three shifts should be allowed. He also contended that since the life of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntire amount of aforesaid expenditure has rightly been treated by the ITO as capital expenditure and he has already allowed depreciation thereon. The CIT(A) should not have granted any further relief out of the aforesaid expenditure. He further contended that the question relating to terminal loss and scrap value of these vessels after those were used has not been considered by the departmental authorities, hence the contention of the assessee that it has no scrap value cannot be accepted. He urged that the order passed by the CIT(A) in relation to aforesaid expenditure should be set aside and that of the ITO be restored. 5. We have carefully considered the rival submissions made by the learned representatives. The assessment order passe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,96,558 are parts of machines and cannot be described as machinery. In the preceding year such M.S. vessels were used in the process of similar production carried out in that year. The substitution in a machine of new parts, viz., M.S. vessels and M.S. tants for old and worn out parts is in the nature of expenditure incurred for replacement and is, therefore, allowable as a revenue expenditure, provided by making such replacement of new parts, no new asset is created or no extension is made in the process of such replacement. The learned counsel for the assessee made a statement at bar clearly confirming that M.S. vessels and M.S. tank purchased during the year under consideration were used for replacement of the old and worn out M.S. vesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is ground also the expenditure incurred for purchase of such consumable material is allowable as Revenue expenditure. 5.3. However, we do not agree with the contention of the learned counsel for the assessee that there is no reliable value of the scrap material which remains after the user of these M.S. vessels and tanks. Such items of mild steel used in the process of production will obviously result in saleable scrap. Even according to the statement of facts it has been stated that the scrap value of vessels, etc., is nearly 10 to 15 per cent as per valuer's certificate. The assessee has further contended that it has always reused the available material for replacement in other vessels. Even considering that some items were reused from ..... X X X X Extracts X X X X X X X X Extracts X X X X
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