The Income Tax Appellate Tribunal (ITAT), Mumbai Bench while upholding the order of CIT(A) said the whenever the jigs and fixtures were replaced due to constant wear and tear and also due to changes in the design of the part, the assessee can claim the same as revenue expenditure for the purpose of Income Tax Act.
The assessee company, M/s. Bajaj Holdings & Investment Ltd. had incurred expenditure on jigs and fixtures amounting to Rs.1,06,11,064/- including capital work in progress amounting to Rs.11,18,955/-. Assessee submitted that these are nothing but replacement of jigs and fixtures in the main plant and machinery and would be eligible for deduction as revenue expenditure.
During the course of assessment proceedings, the assessee requested the AO to allow deduction since the amount was lying in capital work in progress and the same was not put to use during the A.Y.1990-91.
The AO observed that the expenditure incurred on replacement of jigs and fixtures would be capital expenditure and accordingly, granted depreciation thereon. It is not in dispute that assessee had indeed capitalised the replacement cost of jigs and fixtures in its books and had claimed depreciation as per Companies Act in its books.
However, for the purpose of Income Tax, the assessee had claimed the said expenditure as the revenue expenditure on the ground that the said expenditure would fall under the category of “current repairs”.
The CIT(A) treated the expenditure on replacement of Jigs and fixtures as revenue expenditure in the facts and circumstances of the case.
The tribunal consisting of a Judicial Member, Ram Lal Negi and Technical Member, M.Balaganesh noted that expenditure incurred on replacement of jigs and fixtures are basically tooling aids required in the production process and these items are part of the machinery in the automobile industry.
It was further noted that these jigs and fixtures need to be constantly replaced due to constant wear and tear and also due to changes in the design of the part.
Therefore the tribunal in the light of various judgements held that the order passed by the CIT(A) granting relief to the assessee by allowing deduction towards expenditure incurred on replacement of jigs and fixtures does not require any interference.
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