Revenue expenditure for equipment conversion allowed where no new asset emerged and only existing machinery was improved.

Expenditure incurred to convert oil-firing equipment into coal-firing equipment was treated as revenue expenditure because it only improved the working of the existing machine. No new plant or machinery came into existence, and the change did not create an enduring capital asset. The cost was therefore allowable under section 37(1) of the Income-tax Act, 1961, in favour of the assessee.

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Issues: Whether expenditure incurred on conversion of oil-firing equipment to coal-firing equipment was allowable as revenue expenditure under section 37(1) of the Income-tax Act, 1961.

Analysis: The expenditure was incurred only to convert the existing system for better operation of the machine. No new plant or machinery came into existence, and the change was directed to improved working of the existing equipment rather than acquisition of an enduring capital asset.

Conclusion: The expenditure was revenue in nature and was rightly allowed under section 37(1) of the Income-tax Act, 1961, in favour of the assessee.

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