Disallowance of revenue expenditure merely based on description of expense is unsustainable

Shree Sulphurics Pvt. Ltd. Vs ACIT (ITAT Ahmedabad)

ITAT Ahmedabad held that disallowance of revenue expenditure treating it as capital merely on the basis of description of the expenditure without any substantive record is unsustainable.

Facts- The only ground based on which the present appeal is preferred by the appellant is that the ld.National Faceless Appeal Centre, has erred in law and facts by confirming the disallowance of repairs to machineries of Rs.37,50,699/- on the ground that it is capital expenditure and therefore the ld.AO should be directed to delete the said disallowance while computing the total income.

Conclusion- Held that we are not in agreement with the Revenue that expenses to the tune of Rs.37.50 were not in the nature of current repairs to be allowed in terms of section 31 of the Act particularly when the assessee had explained that considering the nature of manufacturing done by it, machinery parts corroded frequently warranting their replacement so as to maintain the machineries in working condition, which has not been controverted by the Revenue . And the finding of the Revenue of the expenses being capital in nature /noncurrent is based on mere description of the expense as replacement of certain machinery with no facts emanating from the records before us to substantiate the same.

FULL TEXT OF THE ORDER OF ITAT AHMEDABAD

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