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Issues: Whether the cost of installing diesel engines in place of worn-out petrol engines of existing buses was allowable as a deduction as current repairs under section 10(2)(v) of the Indian Income-tax Act, 1922.
Analysis: The governing inquiry under section 10(2)(v) was whether the expenditure preserved and maintained an existing asset or brought a new asset into existence or secured a new advantage. The fact that a part of machinery is replaced by a more efficient new part does not by itself take the expenditure outside current repairs if the replacement is made to keep the business asset in working condition. On the further statement of facts, the old petrol engines were not in serviceable condition and were replaced in the existing buses; the focus remained on the buses as the relevant machinery, and the replacement of the engine was treated as a repair of that bus rather than a reconstruction of a new asset.
Conclusion: The expenditure was allowable as a deduction under section 10(2)(v) and was therefore in favour of the assessee.
Ratio Decidendi: Replacement of a worn-out part of an existing business asset may constitute current repairs where the expenditure serves to preserve and maintain the asset and does not amount to bringing a new asset into existence or effecting a renewal or reconstruction.
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