1. R. JAYASIMHA BABU, J---The question referred to us at the instance of the Revenue is as to whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding and had valid materials to hold that the expenditure only represents repairs and renewal to replace the worn out motors in the plant and machinery. The assessment year with which we are concerned is 1980-81.
2. The assessee is a manufacturer of taxtiles. It had, during the assessment year, replaced certain electric motors within the mill and claimed deduction of the expenditure incurred by it for the replacement of motors. The view of the Income-tax Officer was that the expenditure was not allowable as revenue expenditure, as the expenditure was capital in nature.
3. The Commissioner of Income-tax, on appeal disagreed with the. Income-tax Officer. He held that renewal as distinguished from repair is reconstruction of the entirety, meaning by the entirety, not necessarily the whole but substantially the whole subject-matter under discussion, as was observed by Buckley, L.J. In Lurou. Wakely and Wheeler (1911) 1 KB 905 (CA). He held that the entirety of the production apparatus of a spinning mill must not include electric motors, which power the spinning frames and the cost of replacement of motors represents revenue expenditure on repairs by way of renewal.
4. The Tribunal affirmed that view of the Commissioner and observed that, "it is not in dispute that the motor's purchased with the sum of Rs.35,727 have been used to replace the worn out motors in the plant and machinery".
5. Learned counsel for the Revenue submitted that the electric motors being items of machinery which are capable of independent use cannot be regarded as parts of a machinery and the expenditure incurred on purchase of new motors must necessarily, be, regarded as capital expenditure. Counsel relied on the oft-quoted statement of Chagla, C.J., in the case of New Shorrock Spinning and Manufacturing Co. Ltd. v. CIT (1956) 30 ITR 338 (Bom.), wherein it was observed that (page 343): "The simple test that must be constantly borne in mind is that as a result of the expenditure which is claimed as an expenditure for repairs what is really being done is to preserve and maintain an already existing asset. The object of the expenditure is not to bring a new asset into existence, nor is its-object the obtaining of a new or fresh advantage. This -can be the only definition of 'repairs' because it is only by reason of this definition of repairs that the expenditure is, a revenue expenditure.
6. If the amount spent was for the purpose of bringing into existence a new asset or obtaining a new advantage, then obviously such an expenditure would not be an expenditure of a revenue nature but it would be capital expenditure, and it is clear that the deduction which the-Legislature has permitted under section 10(2)(v) is a deduction where the expenditure is a revenue expenditure and not a capital expenditure."
7. Reliance was also placed on the decision of the Supreme Court in the case of Ballimal Naval Kishore v. CIT (1997) 224 ITR 414, wherein the test set out by Chagla, C.J., was approved.
8. Our answer to the question referred to us, therefore, is' in the affirmative, against the Revenue and in favour of the assessee. The assessee is entitled to costs of Rs.750.