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Issues:
1. Whether the expense incurred in fitting new bodies in place of old worn out bodies of lorries is an allowable expense under section 10 (2) (v) of the Indian Income-tax Act? Detailed Analysis: The case involves a reference made by the Income-tax Appellate Tribunal regarding the deductibility of an expense of &8377; 14,700 for fitting new bodies in place of old ones on lorries used by a transport company. The Tribunal initially allowed the expense, prompting the Commissioner of Income-tax to seek the court's opinion. The central issue is whether this expense qualifies as current repairs under section 10 (2) (v) of the Income-tax Act. The Tribunal's reference highlighted conflicting departmental decisions on whether replacing worn-out bodies constitutes revenue or capital expenditure, necessitating a detailed examination by the High Court. In addressing the matter, the Chief Justice emphasized the distinction between current repairs and capital investment. The judgment delves into the significance of maintaining roadworthy vehicles for a transport company's business viability. The analysis considers the cost disparity between renewing bodies (amounting to less than &8377; 3,000 per lorry) and the overall expense of acquiring a new lorry (approximately &8377; 40,000). The judgment underscores the importance of attracting customers by ensuring the vehicles' visual appeal, even if the engine and chassis remain functional. The replacement of worn-out bodies is deemed essential for maintaining operational efficiency, aligning with the concept of current repairs to keep the vehicles in running condition. Drawing parallels with precedents, the judgment cites the Madras High Court's decision on boiler replacement as revenue expenditure and a Privy Council case on railway track renewal, emphasizing the element of degree in determining capital versus revenue expenditure. The judgment also references a Bombay High Court case on loom parts replacement, where it was deemed current repairs. Conversely, a case involving chimney replacement at a colliery was categorized as capital expenditure due to creating a new asset. However, the court distinguishes the present case by highlighting the relatively minor nature of the expenditure on renewing bodies, aligning it more with current repairs than capital investment. Consequently, the court affirms that the expense qualifies as current repairs under section 10 (2) (v) of the Income-tax Act, allowing the deduction and awarding costs to the respondent.
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