TMI Blog1956 (2) TMI 54X X X X Extracts X X X X X X X X Extracts X X X X ..... eighting Motion. The total number of looms in the company was 864. Thus according to the assessee the remaining 218 parts of the old kind were being continuously used by the company and were not replaced. This part is stated by the assessee to be a device which helps in keeping a certain tension for the working of the looms. The old parts had become completely worn out, they were very heavy in weight and were also of a construction which made them not easily workable. Further, they were not available any more in the market as they were no longer manufactured by the machinery manufacturers of Europe which originally manufactured them. It was also stated that the amount of metal required in the old part would be much more and so the cost of the metal alone would exceed the cost of the new part available. The assessee, therefore, replaced them with the parts of a new type which were lighter in weight, could be lifted with the toe of the foot, conformed to the international labour standard and were superior to the old device. Their price came to ₹ 30,557 which amount was deducted in working out the profits of the assessee company from the said business. 3. The Income-tax Offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... produced before the Income-tax Officer and these showed that the sum of ₹ 30,557 was the price of 646 pieces at the rate of ₹ 47 per piece. N. A. Palkhivala, for the assessee. Advocate-General, with G. N. Joshi, for the Commissioner. JUDGMENT CHAGLA, C.J.- The facts which give rise to this reference are few but they raise a rather interesting question. In the calendar year 1951, which is the previous year of the assessee company which is a textile mills the assessee company spent a sum of ₹ 30,557 at ₹ 47 per piece for replacing certain parts in 646 looms out of 864 looms which these mills possessed. This particular part that was replaced was a device which helped in keeping a certain tension for the working of the looms. The old parts which were replaced had become completely worn out, they were heavy in weight and were also of a construction which made them not easily workable. Further, these old parts were not available in the market and if an attempt had been made to prepare parts similar in kind or to acquire them, the cost would have been disproportionately high. The assessee company therefore replaced these parts with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing or restoring a building, machinery, plant or furniture a need may arise to set right certain defects or flaws and an amount may be spent for this purpose and the result may be that although the original asset has been preserved and maintained, no new asset has come into existence and no additional advantage has accrued to the assessee. The simple test that must be constantly borne in mind is that as a result of the expenditure which is claimed as an expenditure for repairs what is really being done is to preserve and maintain an already existing asset. The object of the expenditure is not to bring a new asset into existence, nor is its object the obtaining of a new or fresh advantage. This can be the only definition of repairs because it is only by reason of this definition of repairs that the expenditure is a revenue expenditure. If the amount spent was for the purpose of bringing into existence a new asset or obtaining a new advantage, then obviously such an expenditure would not be an expenditure of a revenue nature but it would be a capital expenditure, and it is clear that the deduction which the Legislature has permitted under section 10(2)(v) is a deduction wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10(2)(xv) was amended, no deduction is permissible under section 10(2)(xv) which is an allowance of the nature described in any of the clauses (i) to (xiv). We are not going to decide the question as to whether this case falls under section 10(2)(xv) or not, but as a general matter of construction we may say that in view of the very strict limitations placed by the Legislature upon a deduction falling under section 10(2)(xv) it is necessary and desirable that as liberal an interpretation should be put upon the right of the assessee to claim deductions under section 10(2)(i) to section 10(2)(xiv). In two unreported cases, References Nos. 17 of 1950 and 36 of 1950, we refused to decide the question whether the particular expenditure claimed there as an expenditure for current repairs fell under section 10 (2)(v) because we took the view that as the case in any event fell under section 10(2)(xv) it was unnecessary to decide the other question. It may be that now the position has changed in view of the amendment introduced by the Legislature and therefore it may not be possible for the Court to say that no prejudice is caused to the assessee if expenditure for repairs is not all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, Patna and Madras. Turning to the judgment of the Patna High Court, with which we are in agreement, in the case of Commissioner of Income-tax v. Darbhanga Sugar Co. Ltd. [1956] 29 I.T.R. 21 Mr. Justice Ramaswami who delivered the judgment of the Court accepted in the first place the definition of Lord Justice Buckley of the expression repair in contradistinction to renewal, and with regard to the qualification of repairs introduced by the Legislature by using the expression current the learned Judge takes the view that current is used in contradistinction to past or arrear repairs, and the learned Judge dissents from the view taken by the Allahabad High Court in Ramkishan Sunderlal v. Commissioner of Income-tax, U.P. [1951] 19 I.T.R. 324, that current repairs means petty recurring expenditure. The view of the Allahabad High Court, with respect, obviously cannot be accepted because the test that the Allahabad High Court seems to have laid down is as to the quantum of expenditure required for particular repairs. Therefore, if the expenditure is petty, according to the Court it would be claimable as a deduction under section 10(2)(v); if the expenditure was substantial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ten years then the expenditure should be a permissible deduction, and if the need for repairs arises after a long time it should not be a permissible deduction, would really induce assessees, if they want to claim a deduction under section 10(2)(v), so to use their plants or machineries that they would have to be repaired constantly from time to time. It is impossible to say with regard to any particular asset when the need for repairs would arise. It would depend upon various circumstances, and in this case it so happens that the particular parts that were used by the assessee for 60 years were such parts that the need to repair them did not arise earlier. It might have been due to the quality of the parts themselves or to the care with which the parts were used by the assessee, but the fact remains that they had not to be repaired till after the passage of 60 years. In our opinion, therefore, this was an expenditure which the assessee company could claim as a permissible deduction under section 10(2)(v) of the Act. We will therefore answer question (1) in the affirmative. We express no opinion on question (2) and therefore we will say that it does not arise. Commissioner to ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
