1966 (9) TMI 13 - HC - Income Tax

Current repairs - cost of installation of diesel engines in the place of petrol engines of the existing buses - allowable deduction u/s 10(2)(v)as revenue expenditure

Summary

Issues:
1. Whether the cost of installation of diesel engines in place of petrol engines of the existing buses is an allowable deduction as revenue expenditure under sections 10(2)(v) or 10(2)(xv) of the Indian Income-tax Act, 1922.

Analysis:
The judgment by the High Court of Mysore addresses the issue of whether the cost of installing diesel engines in place of petrol engines in buses qualifies as a revenue expenditure under the Indian Income-tax Act, 1922. The assessee, a bus operator, incurred a cost of Rs. 14,485 for this replacement. The Tribunal initially rejected the claim, stating it was capital expenditure. However, the High Court highlighted that the focus should be on whether the expenditure constitutes current repairs under section 10(2)(v) or falls under section 10(2)(xv) of the Act. The court emphasized that the distinction between capital and revenue expenditure is not crucial under section 10(2)(v) and cited relevant case law to support this interpretation.

The court criticized the Tribunal for not properly considering the assessee's claim under section 10(2)(v) and directed the Tribunal to provide a further statement of facts to clarify the nature of the expenditure. The court emphasized the importance of determining whether the replacement of engines was for preserving existing assets or obtaining new advantages to classify it as a repair or renewal. The court cited a Bombay High Court case to establish the test for distinguishing repairs from replacements in such scenarios.

Upon receiving the further statement from the Tribunal, which clarified that the replaced petrol engines were not in serviceable condition and the objective was to decrease running expenses by using diesel engines, the court concluded that the replacement qualified as a current repair under section 10(2)(v). The court held that the cost of installing the diesel engines was an allowable deduction under section 10(2)(v) of the Act. The assessee was granted costs for the proceedings, including advocate's fees.