Auto Parts Maker’s Dies and Maintenance Expenses are Revenue in Nature: ITAT dismisses Revenue’s Appeal [Read Order]

The bench of the Income Tax Appellate Tribunal, Delhi, upheld the Commissioner ofIncome Tax (Appeals)’s [CIT(A)] decision that such expenses, incurred for model development and productivity maintenance, were revenue in nature and not capital assets, dismissing Revenue’s appeals.

The assesee, Shriram Pistons and Rings Ltd., a leading manufacturer of pistons, piston rings, and engine components. The Assessing Officer (AO) had disallowed expenses incurred on dies and moulds for developing new models and on productivity maintenance and ISO certification, treating both as capital expenditure under the Income Tax Act, 1961, while allowing only depreciation.

For Assessment Year (A.Y.) 2015-16, additions of ₹1,58,16,785 and ₹13,92,819 were made. For A.Y. 2020-21, similar additions of ₹. 1,26,06,41 and ₹1,20,70,721 were made on the same grounds. The CIT(A), deleted these disallowances, holding them to be revenue in nature, following consistent relief granted in earlier years. The Revenue appealed before the Tribunal.

The Revenue, represented by Sahil Kumar Bansal, argued that the CIT(A) erred in treating the expenditure on dies and productivity maintenance as revenue in nature. It was contended that these expenses created enduring benefits for the assessee, qualifying as capital assets under the scheme of the Act.

However, for the appeal concerning A.Y. 2015-16, the Department admitted that the tax effect of ₹58,06,504 was below the monetary threshold of ₹60 lakh prescribed in CBDT Circular No. 09/2024 dated 17 September 2024, and hence did not object to its dismissal on maintainability grounds.

The Assessee, represented by R.K. Kapoor, and Shruti Gupta, contended that both categories of expenses were regularly incurred in the course of its business operations and had been consistently allowed as revenue expenditure by appellate authorities and the Tribunal in prior years.

It was contended that the appellant authorities had already in the assessee’s own case held expenditure on dies and moulds used in research and development for new model manufacturing as revenue in nature.

The Bench comprising Shamim Yahya, Accountant Member and Anubhav Sharma, Judicial Member held that the CIT(A) had correctly followed its earlier decisions in the assessee’s own case on identical issues. It was held that no change in the facts or legal position was found to warrant a different view.

Accordingly, it was affirmed that the expenses on dies for new model development and productivity maintenance were allowable as revenue expenditure under the Income Tax Act, 1961.

Therefore, both the appeals of Revenue were dismissed.

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