2006 (1) TMI 101

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....rs and insurance on running and maintenance of cars were not covered by the provisions of section 37(3A) of the Income-tax Act and therefore, not includible for the purpose of disallowance under section 37(3A)?" The assessment years involved are from 1984-85 to 1986-87. The assessee claimed deductions from expenditure under the head repairs and insurance under section 31 of the Act. However, the Assessing Officer included the expenditure incurred towards repairs and insurance and allowed the benefits of 20 per cent, deduction under the heading expenditure on running and maintenance of motor cars. Aggrieved by the same, the assessee preferred an appeal. The appellate authority held that the Assessing Officer was not justified in not al....

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....declared that the amount paid on account of current repairs shall not include any expenditure in the nature of capital expenditure." Section 37(3A) on which reliance is placed by the Revenue reads as under: "(3A) Notwithstanding anything contained in sub-section (1), where the expenditure or, as the case may be, the aggregate expenditure incurred by an assessee on any one or more of the items specified in sub-section (3B) exceeds one hundred thousand rupees, twenty per cent., of such excess shall not be allowed as deduction in computing the income chargeable under the head 'Profits and gains of business or profession'." Section 43 defines certain terms relevant to income from profits and gains of business or profession. Clause (3) ....

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....-section (3A) of section 37 of the Act. In the case of CIT v. A.V. Thomas and Co. Ltd. [1997] 225 ITR 29 the Kerala High Court has held that, in view of the definition of the term "plant" under section 43(3), a car is also a plant. Therefore, the amount paid for repairs and towards insurance policy for car could be claimed as deduction. A reading of section 37(1) would make it clear that the section was intended to take in expenditure which was not covered by sections 30 to 36. The provisions contained in sub-section (3A) would apply only to those items of expenditure which were not covered by sections 30 to 36, but were covered by section 37(1). The non obstante clause in sub-section (3A) relates only to the computation of the allowance....