T.R. Senthil Kumar ORDER
Annapurna Gupta, Member (A)
1. Present appeal has been filed by the assessee against order passed by the ld.Commissioner of Income Tax(Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as "Ld.CIT(A)"] dated 15.07.2022 under section 250(6) the Income Tax Act, 1961 (hereinafter referred to as the "Act' for short) pertaining to the Asst.Year 2017-18.
2. The only ground raised in the appeal is as under:
"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 groundthat it is capital expenditure and therefore theld.AO shouldbe directed to delete the said disallowancewhile computing the total income."
3. A perusal of the above ground reveals that the solitary issue in the present appeal relates to disallowance of repairs to machineries amounting to Rs.37,50,699/-, treating it as capital expenditure.
4. We have heard both the parties and carefully perused the orders of the authorities below. The assessment order reveals that the assessee had claimed repairs to machinery to the tune of Rs.2,68,53,153/-. The details of the same were submitted to the AO during the assessment proceedings. On scrutinizing which, he found that certain expenses incurred by the assessee were in the nature of replacement and not repairs. The said expenditure amounted to Rs.72,79,477/-. The details of the same are reproduced at para-5 of the assessment order. On confronting- the same to the assessee, the assessee pleaded that the plant of the assessee-company was 40 years old and that the assessee was in the business of manufacturingvarious acids, which are corrosive and hazardous, and because of this corrosive nature of the products, some of the part of machinery are decayed and to maintain norms of the Gujarat Pollution Control Board, public safety rules etc. the decayed part of the machinery is to be repaired and replaced from time to time. The bills of all the expenses incurred were attached. The AO was not satisfied with the explanation of the assessee and noting that the expenses as tabulated by him related to replacement of various parts, he held that the same cannot be treated as revenue expenditure. He relied on decision in the case of Ballimal Naval Kishore Vs. CIT, MANU/SC/2058/1997 : 224 ITR 414 (SC) in support of his finding, and accordingly, he disallowed repairs and maintenance expenses to the tune of Rs.72,79,477/-. The relevant finding of the AO in this regard at para 5.4 to 5.7 of his order are as under:
"5.4 The reply submitted by the assessee has been considered and found to be not tenable. On verification of the bills submitted by the assessee it is seen that the above expenditure were incurred in connection with the replacement of various parts of machinery and not mere repairing charges or any other expenses of recurring nature. Many of the bills are regarding the machinery parts which are replaced after a particular period of time. Therefore, such expenses cannot be treated as revenue expenditure..
5.5 Reliance is place in the case of Ballimal Naval Kishore Vs. Commissioner of Income-tax SC-HC/AAR MANU/SC/2058/1997 : [1997] 224 ITR 414 (SC)/[1997] 90 TAXMAN 402 (SC)/[1997] 138 CTR 284 (SC) wherein it was held as under:
"Section 31 of the Income-tax Act, 1961, corresponding to section 10(2)(v) of the Indian Income-tax Act, 1922 - Current repairs - Assessment year 1961-62 -Assessee, carrying on business of exhibiting films in a theatre spent amount on new machinery, furniture, sanitary fittings and electrical wiring - In addition thereto, a substantial amount was spent on exte........