Replacement of a worn-out engine in a business truck can qualify as current repairs and revenue expenditure.

Expenditure on replacing a truck's worn-out petrol engine with a diesel engine was treated as current repairs and deductible revenue expenditure because the outlay preserved and maintained an existing business asset rather than bringing into existence a new asset or enduring capital advantage. The decisive test was whether the replacement was part of the continual process of using and maintaining the asset, or whether it amounted to renewal of the entire machinery. As the truck remained the same business asset and only an unserviceable part was replaced, the expense was attributed to running the business and not to capital account.

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Issues: Whether the expenditure incurred for replacing the petrol engine of the assessee's truck by a diesel engine was allowable as current repairs and therefore deductible revenue expenditure.

Analysis: The decisive test was whether the outlay was made to bring into existence a new asset or an advantage of enduring character, or whether it was incurred in the continual process of using and maintaining an existing business asset. The truck was an existing machinery asset used in the business, and the petrol engine had become unserviceable. Replacing that engine was treated as preservation and maintenance of the asset rather than renewal of the entirety or substantial replacement of the machinery. The expenditure was therefore attributable to the running of the business and not to capital account.

Conclusion: The expenditure was allowable as current repairs and was deductible revenue expenditure; the finding was in favour of the assessee and against the revenue.

Ratio Decidendi: Expenditure incurred for replacing a worn-out part of an existing business asset is revenue expenditure if its true object is to preserve and maintain the asset for use in the business and it does not bring into existence a new asset or an enduring capital advantage.

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