Consumable Tools are 'Revenue' in Nature: ITAT allows Deduction to Walvoil Fluid Power India [Read Order]

The ITAT Bangalore, while granting relief to M/s Walvoil Fluid Power India Pvt Ltd, held that the consumable tools are revenue in nature and therefore, deduction is allowable as expenditure in the profit and loss account.

The assessee is a subsidiary of Walvoil S.p.A Italy. The assessee is into the business of manufacture of hydraulic vales for automobiles and for industrial machineries. The assessee has manufacturing unit and assembling plant in Whitefield, Bangalore with necessary infrastructure. The assessee was aggrieved by the order of the Assessing Officer who made an addition of Rs.1,68,36,376/- towards consumable tools claimed as revenue expenditure by the assessee.

The two-member bench comprise of Shri George George K, Judicial Member and Ms. Padmavathy S, Accountant Member relied on the decision of the Supreme Court in Sarvana Spinning Mills Pvt. Ltd., wherein it was held that these tools need to have independent functions and also they need to have a benefit of enduring nature.

“In the given case as submitted by the Ld AR these tools are spares used in the operations of the assessee to facilitate the manufacture of finished products that have short working life needing frequent replacement and do not have any independent function. The test of enduring benefit is not the only criteria for concluding an item to be revenue or capital in nature. The value of each of the items, resale value etc also warrants consideration. Based on the materials on record and the facts we are of the considered view that the tools are to be treated as revenue in nature and eligible to be claimed as expenditure in the profit and loss account. Hence, we allow the ground in favour of the assessee,” the Tribunal said.

To Read the full text of the Order CLICK HERE

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