The main legal point established in the judgment is that the replacement of worn out parts of machinery, such as the installation of diesel engines in place of petrol engines, can constitute current repairs under section 10(2)(v) of the Indian Income-tax Act.

Hegde, J.

1. This order is in continuation of the order made by this court in I. T. R. C. No. 1 of 1961. There was no need to number this proceeding separately.

2. In I.T.R.C. No. 1 of 1961 a Bench of this court, to which one of us (Hegde J.) was a member, made the following order on June 21, 1962 :

'The question of law referred to this court under section 66(1) of the Indian Income-tax Act hereinafter, reads thus :

"Whether the amount of Rs. 14,485 being the cost of installation of diesel engines in place of petrol engines of the existing buses was an allowable deduction as revenue expenditure ?"

Concisely stated, the facts are as follows : The assessee is a firm of bus operators. Previously their buses were run with petrol engines. In the accounting year relevant to the assessment year (1957-58), the assessee replaced the petrol engines of some of their buses with diesel engines. The cost of installation of the diesel engines amounted to Rs. 14,485. This amount was claimed as a permissible deduction either under section 10(2)(v) or under section 10(2)(xv) of the Act. The tribunals below rejected the claim made by the assessee. Dealing with the claim in question, the Tribunal, in paragraph 2 of its order, observed thus :

"The first contention is that the expenditure of Rs. 14,485 incurred on installation of diesel engines in place of petrol engines on the buses used for running the assessee's transport business should be allowed as a revenue expenditure and must not be disallowed as capital expenditure. We have repeatedly held that such expenditure is neither an expenditure on "current repairs" within the meaning of section 10(2)(v) nor even on "repairs" falling within the omnibus clause (xv) of section 10(2). It is purely and simply capital expenditure. Hence, substantially for the reasons given by the Appellate Assistant Commissioner, we reject the contention that the said sum is a permissible deduction."

3. We are not satisfied that the Tribunal had addressed itself to the question that really arose on the contention advanced on behalf of the assessee. As mentioned above, the assessee claimed deduction on two alternative grounds. He, firstly, contended that the expenditure incurred was in respect of "current repairs" of machinery and, therefore, he was entitled to deduction under section 10(2)(v). Alternatively, he claimed that if the expenditure does not fall within any one of the clauses (i) to (xiv) of section 10(2), the same being not in the nature of capital expenditure, he is entitled to deduction under section 10(2)(xv). At present, we have not considered the assessee's case under section 10(2)(xv), as, in our opinion, the Tribunal has not properly considered the assessee's case under section 10(2)(v). The claim under section 10(2)(xv) will arise for consideration only if we reject the assessee's claim under section 10(2)(v). Therefore, the first question to be decided is whether the assessee has justified his claim under section 10(2)(v).

4. In considering a claim for deduction under section 10(2)(v), we do not think that the question whether the expenditure is a capital expenditure or revenue expenditure is relevant. Section 10(2)(v) nowhere says that expenditure of a capital nature cannot be brought within the scope of that provision. On the other hand, a reading of clause (xv) of section 10(2) makes it abundantly clear that the deductions claimed under clauses (i) to (xiv) of section 10(2) may be either a revenue expenditure or capital expenditure. Otherwise, there was no purpose in the legislature saying in clause (xv) that :

"Any expenditure (not being an allowance of the nature described in any of clauses (i) to (xiv) inclusive, and not being in the nature of capital expenditure or...."

If capital expenditure was excluded from the scope of clauses (i) to (xiv) of section 10(2), there was no need to refer to capital expenditure in clause (xv). The question whether capital expenditure can fall within the scop