Case Law Details
Tanfac Industries Ltd. Vs ACIT (ITAT Chennai)
ITAT Chennai held that replacement/ substitution of HF Reactor is capital expenditure and eligible for depreciation only. Such replacement couldn’t be considered as ‘current repairs’.
Facts-
The assessee is engaged in manufacturing of fluorine-based chemicals. The assessee incurred expenditure on repairs and renovation of worn-out reactors and claimed the same to be revenue expenditure. It transpired that the assessee replaced its old reactor with new reactor costing Rs.3 Crores. The capacity of old reactor and new reactor is stated to be the same. During set aside proceedings, the assessee relied on various judicial pronouncement in support of the claim. The assessee’s submissions were subjected to remand proceedings before Ld. AO.
AO submitted that a new machinery viz. H.F. Reactor was installed and the cost thereof was capitalized by the assessee in the books of account and therefore, there was acquisition of asset with enduring benefit. Accordingly, it was not to be allowed as revenue expenditure but depreciation of 25% would be allowable to the assessee.
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