1992 (10) TMI 31

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.... that the expenditure amounting to Rs. 18,402 incurred by the assessee-company on the replacement of petrol engine with diesel engine in its car did not result in an advantage of enduring nature to the assessee and hence the aforesaid expenditure was revenue in nature ?" The facts of the case are that the assessee is a private limited company and, during the assessment year 1978-79, it replaced one petrol engine of its car by a diesel engine, the cost of which was Rs. 18,402. The Incometax Officer found that the said expenditure is not of revenue nature but is of capital nature and, therefore, cannot be allowed as deduction. An appeal was preferred to the Commissioner of Income-tax (Appeals) and the appellate authority found that install....

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....n which has to be taken into consideration. Replacement of machinery in the usual course of business which is worn out would be to maintain the machinery. In CIT v. Mir Mohammad Ali [1964] 53 ITR 165, the Supreme Court has held that a diesel engine is clearly machinery and extra depreciation was allowable in respect of replacement of the petrol engine in the assessee's bus by a diesel engine in addition to normal depreciation. If machinery or a part thereof requires repair to preserve and maintain the machinery, then it will be an allowable deduction, but in that case the expenditure must be such which does not bring a new asset into existence nor its object to obtain a new or fresh advantage. The Bombay High Court in CIT v. Polyolefi....