REPAIR,REPLACE,RENEWAL OR RENOVATION CORPORATE TAX PLANNING

• REPAIR,REPLACE,RENEWAL OR RENOVATION
• CORPORATE TAX PLANNING
• REPAIR

1. THE TERM REPAIRS MEANS RESTORATION OF AN ASSET TO THE ORIGINAL AND NORMAL CONDITION BY INCURRING CERTAIN EXPENDITURE WITHOUT INCREASING THE EFFICIENCY BEYOND ITS ORIGINAL EFFICIENCY.
2. REPAIRS IS DONE TO MAINTAIN THE ORIGINAL EFFICIENCY AND ITS OBJECTIVE IS NEITHER TO BRING ANY NEW ASSET OR OBTAINING A NEW ADVANTAGE. SO IT IS NATURE OF REVENUE EXPENDITURE.
3. EXPENDITURE ON REPAIRS IS AN IMPORTANT ITEM OF EXPENSE AND BONE OF CONTENTION BETWEEN INCOME TAX  DEPARTMENT AND  ASSESSEE. THE PERMISSIBLY OF  REPAIRS IS DEALT IN FOLLOWING SECTIONS:-
4. SEC 30 WHICH COVERS REPAIR EXPENSES RELATING TO BUSINESS PREMISES.
5. SEC 31 WHICH COVERS REPAIR EXPENSES RELATING TO PLANT, MACHINERY AN D FURNITURE
6. DEDUCTION FOR RENT,RATES,TAXES REPAIRS ETC FOR BUILDING ( SEC 30)

• ALLOWANCE OF REPAIR TO TENANTS U/S 30(A)(I)

·         IF THE LEASE AGREEMENT CONTAIN PROVISION THAT TENANT WILL BEAR THE COST OF REPAIRS. THEN IT IS PERMITTED OTHERWISE NOT.

·         ALLOWANCE OF CURRENT REPAIRS TO OWNERS –SEC 30(A)(II)  :- CURRENT REPAIRS MEANS REPAIR DURING THE FINANCIAL YEAR FOR THE PURPOSE OF PRESERVING OR MAINTAINING AN ALREADY EXISTING ASSETS. NEITHER THE NEW ASSETS COME INTO THE EXISTENCE OR DOES NOT GIVE THE ASSESSEE NEW ADVANTAGE.

·         THIS SECTION PERMITS THE EXPENSE INCURRED ON THE CURRENT REPAIR DOES NOT DIFFERENTIATE BETWEEN REVENUE NATURE AND CAPITAL EXPENDITURE.

• DEDUCTIONS UNDER SEC 31
• REPAIRS & INSURANCE OF MACHINERY, PLANT AND MACHINERY :  THE FOLLOWING DEDUCTIONS ARE ALLOWED:-
• THE AMOUNT PAID ON ACCOUNT OF REPAIR THERE TO
• THE AMOUNT OF ANY PREMIUM PAID IN RESPECT OF INSURANCE AGAINST DAMAGE OR DESTRUCTION THEREOF
• REPAIRS AND RENEWALS
• NO CLEAR DIFFERENCE BETWEEN REPAIRS AND RENEWALS.
• THE TERM REPAIRS/CURRENT REPAIRS IS WIDE ENOUGH TO INCLUDE REPLACEMENT OR RENEWAL ETC IN CERTAIN CASES.
• REPAIR IS UNDERTAKEN BY REPLACING A OR ANY PART OF  THE ASSET AND HENCE REPAIRS OR RENEWAL FOR DEDUCTION U/S 30 AND 31 HAVE BECOME COMMON
• BUT IN CERTAIN CASES THEY ARE TREATED DIFFERENT
• REPLACEMENT

1. IT IS DIFFERENT FROM REPAIRS. REPLACEMENT IMPLIES THE REMOVAL OR DISCARDING OF THE THING THAT WAS IN USE BY A DIFFERENT OR NEW THING CAPABLE OF PERFORMING THE SAME FUNCTION WITH GREATER EFFICIENCY OR SAME EFFICIENCY.
2. IT MAY BRING A NEW ASSETS OR IT MAY REPLACE DEFECTIVE/BROKEN PART
3. WHERE REPLACEMENT IS UNDERTAKEN TO  REPLACE OR RENEW ANY PARTS TO BRING THE ASSET INTO ORIGINAL POSITION THEN IT IS TREATED AS CURRENT REPAIR  AND PERMITTED IN THE YEAR IT IS INCURRED.

• TAX PLANNING

1. HEAVY EXPENDITURE ON REPAIRS, RENEWAL OR REPLACEMENT SHOULD BE DONE IN THE YEAR HAVING SUBSTANTIAL PROFIT.
2. INSTEAD OF REPLACING THE ASSET ENTIRELY ,PART OR PARTS OF THE ASSETS SHOULD BE REPLACED
3. MAINTAIN FULL  DETAILS OF HEAVY EXPENDITURE INCURRED ON REPAIRS ETC. AND SEPARATE BILLS SHOULD BE TAKEN FOR

• IF REPAIRER BESIDES GIVING REPAIR SERVICE ALSO MAKE AVAILABLE PART OR PARTS THEN SEPARATE DISCLOSURE MUST BE MADE IN THE BILL FOR THE COST OF PARTS AND SERVICE CHARGES CHARGED BY THE REPAIRER