BHARAT GEARS LIMITED Vs. COMMISSIONER OF INCOME-TAX

JUDGEMENT

(1.) In all these three appeals the assessee is the same and even the issue is identical, which pertains to three different assessment years, the factual premise on which such an issue has arisen for consideration is somewhat different. Therefore, we propose to first take up the facts of ITA No.14/2005 to understand and appreciate the question of law on which this appeal is admitted.

(2.) This appeal relates to assessment year 1994-95 and is filed by the assessee. In this year the assessee had claimed an expenditure of Rs.83,79,134/- as revenue expenditure on the ground that this was incurred by repairs and reconditioning of Fent Gear Machine and was in the nature of current repairs . This machine was purchased by the assessee in the year 1981 and it broke down on 24.10.1991. The work for repairs was assigned to M/s. HMT Limited, a concern of the Government of India. The said HMT Limited submitted the appeal in the aforesaid sum for carrying out the repairs. The Assessing Officer was of the view that the expenditure of the aforesaid magnitude incurred by the assessee for reconditioning the machine had given the assessee a benefit of enduring nature and therefore, the amount was not allowable as current repairs. He, thus, treated the expenditure as capital in nature and allowed depreciation @ 12.5%. According to him, it was evident not only from the quantum of expenditure, which was huge, while reconditioning the machine various spare parts were replaced. The assessee challenged the order of the Assessing Officer and the matter was re-examined by CIT(A) in appeal who held otherwise. He was of the view that expenditure was of revenue nature. While giving this finding the CIT(A) was influenced by the following factors:-

(3.) Taking into consideration the aforesaid facts, the CIT(A) held that the capacity of the new machine was not more than the original machine; the motors etc. are of the same nature which were with the original machine; and the quantum of expenditure was not a relevant parameter for considering the disallowance of repair expenses.