Law:

Section:

Section 30 of the Income-tax Act, 1961 [Corresponding to section 10(2)(v) of the Indian Income-tax Act, 1922 - Rent, rates, taxes, repairs and insurance for buildings - Buses owned by assessee previously ran with petrol engines - Petrol engines were not in serviceable condition, thus, assessee replaced petrol engines with diesel engines - Whether expenditure so incurred on installation of diesel engines in place of petrol engines of existing buses was allowable deduction under section 10(2)(v) of 1922 Act - Held, yes FACTS The assessee was a firm of the bus operators. Previously the buses ran with the petrol engines. The assessee replaced the petrol engines of some of the buses with diesel engines. The amount spent on installation of diesel engines was claimed as permissible deduction either under section 10(2)(v) or under section 10(2)(xv) of 1922 Act. The Tribunal disallowed the assessee's claim. On reference: HELD It was clear that the petrol engines which were replaced were not in serviceable condition. Therefore, the choice before the assessee was either to replace them by new petrol engines or by diesel engines. It was not possible to find out as to whether there was any great difference between the price of Petrol engines and that of diesel engines. The old petrol engines were replaced, because they were not in working condition. Section 10(2)(v ) of the 1922 Act concerns itself with the current repairs of the concerned machinery. In the instant case, the machineries concerned were buses and not the petrol engines that were replaced. The replacement of worn out parts of a machinery does not by itself bring a new asset into existence. The fact that an old part of a machinery is replaced by a new part does not mean that a new asset has been brought into existence. In the application of section 10(2)(v) of the 1922 Act, the focus is on the current repairs to buildings, plants or machineries used for the purpose of business and not to any part of them. While effecting current repairs to any machinery old parts may have to be replaced by new parts, sometimes by more efficient parts. There was no doubt that new assets had been brought into existence. But in…

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