Replacement of Parts, Machines etc., in a production System – Tax Implications

1. Introduction :-It is quite common among the businessmen involved in a manufacturing activity to carry out replacement of parts or machines in a production system. The very word ‘replacement’ would only refer to a situation where it would mean that an existing facility is maintained at its level of efficiency. In other words, such replacement of parts or machines would not result in enhancement of production capacity. Whether such replacement cost is to be treated as revenue or capital expenditure is always a controversial issue. It is quite common for the Revenue to treat such expenditu...