TMI Blog1955 (9) TMI 58X X X X Extracts X X X X X X X X Extracts X X X X ..... bted that the replacements of the parts became necessary because of fair wear and tear. We held that the expenditure fell within section 10(2) and allowed its deduction in computing the assessable profits of the respondent company. We expressed our decision in the following words:- The Appellate Assistant Commissioner says 'current repairs' in section 10(2)(v) means only petty repairs carried on periodically and will not include repairs or renewals costing a large sum of money which has to be spent after the machine has been run for a number of years. The section itself says nothing about the magnitude of the expenses. In this case, however, the cost of repairs is only a small fraction of the cost of machinery. There is no case here of renewal of the entire machinery. Where a worn out part is renewed, the effect on the machinery taken as a whole is only repair. The Appellate Assistant Commissioner does not explain what 'periodically' means. Is the period to be less than a year or may it be one or two or three years; and where is the line to be drawn? The life of a component will depend not only on its hard wearing quality but also on the extent to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee. JUDGMENT RAMASWAMI, J.- In this case the assessee claimed before the Income-tax authorities that a sum of ₹ 17,256 was spent on machinery repairs and that the amount should be deducted from taxable income under section 10(2)(v) of the Income-tax Act. According to the assessee, a sum of ₹ 4,200 was spent for replacing a fire box for locomotive, a sum of ₹ 8,714 for replacing a cast iron head-stock for rollers and a sum of ₹ 4,336 for purchase of a cast iron sublimer (for generating sulphur gas). It was claimed that these replacements were necessary because of fair wear and tear. The Income-tax Officer held that the deduction was not permissible. The assessee took an appeal to the Appellate Assistant Commissioner. It was contended on assessee's behalf that the parts purchased were component parts of a larger plant and the replacement was necessary because the parts had become worn out and that the replacement did not enhance the value of the machinery or change its identity. The contention was rejected by the Appellate Assistant Commissioner on the ground that the assessee was entitled to a deduction under section 10(2)(v) only if t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in order. According to the New Oxford Dictionary, the word repair means to restore to good condition by renewal or replacement of decayed or damaged parts or to renew or renovate some thing or part, In an English case, Lurcott v. Wakely and Wheeler*, a question arose as to the interpretation of a covenant between landlord and tenant which required the latter to substantially repair and keep in thorough repair and good condition the demised premises . At page 923 Buckley, L.J., states: 'Repair' and 'renew ' are not words expressive of clear contrast. Repair always involves renewal; renewal of a part; of a subordinate part. A skylight leakes; repair is effected by hacking out the putties, putting in new ones, and renewing the paint. A roof falls out of repair; the necessary work is to replace the decayed timbers by sound wood; to substitute sound tiles or slates for those which are cracked, broken, or are missing; to make good the flashings, and the like. Part of a garden wall tumbles down; repair is effected by building it up again with new mortar, and, so far as necessary, new bricks or stone. Repair is restoration by renewal or replacement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n in respect of such wear, and represented the cost of restoring them to a state in which they could continue to earn income. It did not result in the creation of any new asset; it was incurred to maintain the appellants' existing line in a state to earn revenue. The analogy of a wasting asset which appears to have affected the minds of the Special Court has really no application to such a case as the present. On behalf of the Income-tax Department, Mr. R.J. Bahadur referred to a decision of Rowlatt, J., in O'Grady v. Bullcroft Main Collieries Ltd.* In that case, the assessee had replaced a chimney which had become unsafe by a new chimney, erected on an adjacent site. The company claimed as a deduction in computing its profits that part of the cost of the new chimney which was charged in its accounts for the corresponding accounting year. It was held by the Special Commissioners that the replacement of the chimney was a replacement of a capital nature and that no part of the expenditure upon it could be allowed as deduction from taxable profits. The decision of the Special Commissioners was upheld by Rowlatt, J., who took the view that the new chimney was not a part of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n. I shall next examine the meaning of the word current in section 10(2)(v) of the Income-tax Act. According to the New Oxford Dictionary, the word current is derived from the Latin word currere to run and Old French word corant, which is present participle of courir. The word current , therefore, literally means running . According to the lexicographic meaning current must be interpreted as running in time, belonging to the present time . I, therefore, think that the expression current repairs to machinery which occurs in section 10(2)(v) must be interpreted to mean repairs to machinery in the current accounting year. In other words, current is used in contradistinction to past or arrear repairs. In the Madras case, Commissioner of Income-tax and Excess Profits Tax, Madras v. Sri Rama Sugar Mills, Ltd. [1952] 21 I.T.R. 191, Satyanarayana Rao, J., expressed a similar view with regard to the interpretation of section 10(2)(v). The other learned Judge, Raghava Rao, J., held that the expression current repairs must denote expenditure on repairs to plant or machinery in a running condition and if the repairs are effected after the machinery or plant comes to a stand ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
