Replacement of broken and damaged gear box of furnace klin is current repairs under Section 31(1), so was held by the Income Tax Appellate Tribunal (ITAT), Cuttack.
Surface Furnace Kiln was installedand the cost at that point of time was nearly Rs.90 crores. Subsequently, two more new kilns were installed by the assessee at a substantial higher cost. It was the submission that what was replaced was not one gear box but two gear boxes. It was the submission that the expenditure on the replacement of two gear boxeswere claimed under current repairs. It was the further submission that the issue is being raised in the revenue’s appeal and, therefore, the assessee has also raised alternative claim that if the said claim of expenditure is not allowable under current repairs u/s.31(1) of the Act, it should be allowed u/s.37(1) of the Act as revenue expenditure.
The Counsel for the Revenue submitted that the new gear boxes fitted did not result any better conduct or improvement to the existing business but it was for the purpose of continuing usage to the already existing machinery, which was under use itself. It was a plain and simple repair to plant and machinery which had to be done because old gear boxes had failed. It is not an improve gear box, no improvement has been done and no enduring benefit has also come into existence.
The bench consisting of George Mathan , Judicial Member and Arun Khodpia, Accountant Member held that “Here, the facts clearly show that the Furnace Kiln was fully operational and the gear box failed and were replaced. The whole of plant and machinery being Furnace Kiln was not replaced but only current repairs in the form of replacement of broken and damaged gear box and, therefore, same is allowable u/s.31(1) of the Act as current repairs.”
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