A. Certain common expenses incurred for the purpose business or profession and allowed as deduction, as decided by case laws, are:
Replacement of Machinery:
Expenditure on replacement of old machines is in the nature of accumulated repairs and not current repairs. Therefore, the High court allowed such deduction under section 37 in place of section 31. Refer CIT v Gitanjali Mills Limited 265 ITR 681 (2004).
Further, where parts of larger machines are purchased by the assessee, expenditure on such parts is allowable as revenue expenditure. Refer CIT Mod Industries Limited 197 Taxmann76.
Again, replacement of moulds did not result in creation of new capital asset or benefit of enduring nature, mere fact that moulds were used in production process could not be conclusive as to the nature of expenditure, hence, expenditure on replacement of moulds was revenue expenditure. Refer CIT vs. Malerkotla Steels & Alloys (P.) Ltd 237 CTR 201 / 49 DTR 1.
Dr KK Aggarwal
Padma Shri Awardee
Vice President CMAAO