Case Law Details
CIT Vs Super Cassettes Industries Ltd. (Delhi High Court)- Brief- The brief facts of the case are that the assessee has debited a sum of Rs. 3,78,27,658/- under the head machinery repair and maintenance in Unit C-5. This unit was manufacturing plastic components, namely, shell,roller, lock, CD shell box etc. These components are primarily used for assembling of audio cassettes and packing of CDs. The assessee had installed more than 100 injection moulding machines at Unit C-5 which was established in 1988. The injection moulding machines were purchased and installed in phase manner. The last injection moulding machine was imported in financial year 1999-00.
According to the assessee, the moulds are integral part of an injection moulding machines and different molds have to be used for making different varities of plastic components. It was contended that mould an necessary input for making the desired plastic components. These moulds have to be replaced over a period of time due to normal wear and tear. The assessee used to purchase new injection moulding machine. Moulds purchased alongwith such new machines are capitalized by it alongwith the cost of new injection moulding machine. However, if moulds only are replaced then it claimed the expenses representing the value of replaced mould as revenue expenses
ITAT Ruling:- The tribunal in the impugned order has rightly relied upon the decision of this Court in Commissioner of Income Tax Vs. Jagatjit Industries Ltd. [2000] 241 ITR 556, wherein it has been held as under:-
“Whether on given set of facts, replacement of certain items, forming an integral or important part of the machinery would be revenue expenditure or capital expenditure is primarily a question of fact, to be decided in the context of the business carried on by an assessee. Merely, because the benefit accruing by the expenditure is of enduring nature, is by itself not a conclusive test to hold it as a capital expenditure (see Empire Jute Co. Ltd. v. CIT [1980] 124 ITR 1 (SC)]. Normally initial investment on machines and their parts will be in the nature of capital expenditure but replacement of parts of an existing machinery in the case of their working will be a revenue expenditure.
High Court Ruling: – In the instant case having regard to the nature of the business of the assessee and applying the principle of law enunciated in Mysore Spun Concrete Pipe Pvt. Ltd.’s case [1992] 194 ITR 159 (Kar), the Tribunal has reached a conclusion that the moulds in question do not enhance the capacity of the existing machines and are merely replacements for the moulds damaged during the process of manufacture of glass. It is also evident from the format of the question proposed by the Revenue, that finding of the Tribunal to the effect that the expenditure in question was incurred by the assessee on the ‘replacement’ of the moulds is not under challenge.
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