1970 (11) TMI 20 - HC - Income Tax

Company claimed deduction under section 10(2)(v)of the amount expended on replacement of worn out cotton bowls in calendering machines - claim was disallowed by the Income-tax Officer on the ground that this expenditure was not for current repairs - held that replacement of cotton bowls is covered by the expression current repairs

Summary

Issues: Whether expenditure on replacing cotton bowls constitutes current repairs under section 10(2)(v) of the Indian Income-tax Act, 1922.

Analysis:
The case involved a company claiming deduction for expenditure on purchasing new cotton bowls for calendering machines under section 10(2)(v) of the Act. The Income-tax Officer initially disallowed the claim, stating it was not for current repairs. However, the Appellate Tribunal later allowed the deduction, leading to a reference to the High Court by the Commissioner of Income-tax, U.P. The Tribunal sought additional information from the Income-tax Officer to ascertain the nature of the expenditure. Upon review, the Tribunal concluded that the replacement of cotton bowls constituted current repairs, considering the heavy wear and tear on the bowls due to constant contact with cloth during the calendering process.

The High Court examined the definition of "repair" and "renew" as discussed in Kanga's Commentary on Income-tax, emphasizing that repair involves renewal of subsidiary parts of a whole. It also referred to previous judgments to distinguish between current repairs and capital expenditure. Notably, the court cited the case of Ramkishan Sunderlal, where changing cables in a flour mill was not considered current repair due to the substantial cost involved. Conversely, in Mahalakshmi Textile Mills Ltd., the Supreme Court held that certain modifications to machinery constituted current repairs, allowing deduction under section 10(2)(v).

The High Court rejected the restrictive interpretation of "current repairs" as only petty repairs, emphasizing that the extent of permissible repairs depends on the nature of machinery. In this case, the replacement of cotton bowls, although they may last for years, was deemed necessary due to wear and tear, falling within the scope of current repairs. Therefore, the High Court upheld the Tribunal's decision, ruling in favor of the assessee and allowing the deduction under section 10(2)(v) of the Act. The court answered the question in the affirmative, directing the Commissioner of Income-tax, U.P., to pay costs to the assessee.