Allowing the appeal of the assessee the Court held that what was being done was to preserve and maintain an already existing asset and the expenses were not incurred to bring a new asset into existence or to obtain a new or a fresh advantage to the business of the assessee. In that view of the matter, the object of the assessee in incurring the expenses in replacement was not with a view to bringing into existence a new asset or to make substantial replacement or renovation, but the assessee was motivated in making the expenses by the object of preserving and maintaining the asset for the purpose of use in the business. ( Addl .CIT v. Desai bros (1977) 108 ITR 14 (Guj)(HC) . Court also held that the expenditure incurred on dies and tools was a recurring revenue expenditure and no capital asset of enduring benefit comes into existence more so because the dies need to be replaced often. ( AY.1997-98)
Precision Wires India Ltd. v. ACIT (2020) 424 ITR 130/ 272 Taxman 42 (Guj)(HC)
S.37(1): Business expenditure — Capital or revenue-Expenditure on replacing machinery destroyed by fire — Expenditure on dies and tools — Allowable as revenue expenditure.
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