Case Law Details
ACIT Vs Nitrex Chemicals India Ltd. (ITAT Delhi)
If whole machine is replaced instead of a part then only the expenses would be treated as Capital Expenditure
Conclusion: In present facts of the case, the Hon’ble Tribunal while deducting the additions made by Ld. AO for repair and maintenance, it was observed that if the replacement is of a baby part only, then the same cannot be considered to be a capital expenditure. It is only when a baby part alone cannot be repaired and the whole of machine is required to be replaced, the expenditure of replacement will be of capital nature.
Facts: In present facts of the case, the appeal has been preferred by the Revenue and the Assessee against appellate order dated 20.02.2017 in appeal no. 248/16-17 for the assessment year 2012-13. The Assessee company was engaged in the business of manufacturing of Industrial Nitrocellulose, having plant at Gujrat. During the course of scrutiny assessment proceedings, Ld AO had made several additions. Like during the course of assessment proceedings, the assessee company was asked to show cause as to why loss on foreign exchange fluctuation on ECB may not be added to taxable income on the similar lines as in earlier assessment years. The Ld AO observed that as the term loan was taken for fixed assets later on converted into USD the loss is not admissible u/s 37(1) of the Act. Then, during the course of assessment proceedings, it was observed from the P&L account that the assessee had made huge expenses under the head repair and maintenance & replacement amounting to Rs. 3,08,45,539/- as compared to last year’s expenses at Rs. 53,64,765/-. It was held that the assessee has claimed excess depreciation of Rs. 8,64,264/- on account of building and machinery destroyed by fire amounting to Rs. 86,42,865/- and the same was added back to the assessee’s total income. In regard to 4th addition, Ld AO as observed from the P&L account that the assessee had made huge expenses under the head repair and maintenance & replacement amounting to Rs. 3,08,45,539/- as compared to last year’s expenses at Rs. 53,64,765/-. The Ld AO found them not verifiable in nature of revenue expenditure an amount to extent 20%, i.e Rs 52,64,790 was considered to be capital in nature and added back to the total income.
The Ld CIT(A) had partly allowed the appeal. The Hon’ble Tribunal observed that as for the disallowance of foreign exchange fluctuation loss of Rs. 1,03,34,504/- it can be observed that Ld. CIT(A) has followed the Hon’ble Delhi High Court’s order dated 03.08.2018 in regard to assessee’s own case where considering the ECB loan as an old one the treatment of the foreign exchange fluctuation as revenue income or loss was sustained and Ld. DR was unable to cite any change of facts or law. There was no force in the ground raised by Revenue.
Please become a Premium member. If you are already a Premium member, login here to access the full content.
Author Bio
