IN RE: RATNA SINGH Vs. AND

JUDGEMENT

(1.) In this matter a reference is asked for on two questions. The, first is as regards the sum of Rs. 3,309 disallowed on the ground that it is capital expenditure and the other is as regards a sum of Rs. 8,653 which is claimed as the loss on a car which was so damaged by an accident that it had to be sold as scrap iron.

(2.) As regards the first point the Commissioner was of opinion that what was done was not merely a renewal of wasting assets but that new parts were put on to the car. It is not disputed that 20 per cent of the value of the car is allowed on the footing that the life of the car was only 5 years. It is also not disputed that the cost of repairs is allowed. The point which is now raised is that Sub-clause 9 of Section 10, Clause 2 allows a further deduction. Sub- clause 9 of Section 10, Clause 2 runs as follows: " Any expenditure (not being in the nature of capital expenditure) incurred solely for the purpose of earning such profits or gains." Where a claim is made as in the present case the question which has to be decided is whether the expenditure incurred is in the nature of capital expenditure or not. Having regard to the items which have been disallowed by the Commissioner, I do not think it can be said that they were merely renewal of wasting assets. The materials before me are not sufficient to hold that the Commissioner is wrong and that a reference should be made. Unless it appears from the evidence before the Commissioner that the expenditure was only in respect of renewal of wasting assets, I think the allowance of 20 per cent, and the allowance for repairs should be taken to cover the ordinary wear and tear of the car. I do not think that any useful, purpose would be served by directing a reference to the High Court of a question which will practically turn on evidence and on the scanty materials before me I cannot say that the petitioner has proved on the facts that the expenditure was necessary as a renewal of wasting parts of the car. No doubt in one sense every part of the car does waste by use. But the test I think will be whether having regard to the part of the car which is repaired it is such as requires a renewal from time to time or such that with ordinary repair it lasts for the lifetime of the car. For example the body or the radiator or the wheels generally last for the lifetime of the car while the tyres or the hood or such other parts are to be renewed, periodically.

(3.) As regards the second question raised it turns upon the construction of the word obsolete. ,Where a car falls into a ditch or otherwise becomes so damaged that it cannot be used as a car and it has to be sold as scrap iron, I think prima facie, the person is entitled to claim allowance. Mr. Anantakrishna Iyer contends that in such cases no allowance ought to be given and that the word "obsolete" must be confined to cases where owing to change in the machinery or owing to new discoveries the machinery is not fit for the purpose for which it was originally intended or would not be fit without incurring expenditure which is unreasonable in the circumstances. It seems to me that it is unreasonable that a person can claim allowance on the machinery which though in working order has been superseded by invention which makes its use not profitable but that a total destruction of the machinery leaves the trader without any remedy. I think the word "obsolete" should be taken to include cases of unfitness arising from whatever cause. I am of opinion that a question of considerable importance is involved and that it is desirable to have an authoritative ruling on the question whether the total destruction of a machinery which renders it unfit for the purpose for-which it was originally intended and a sale of which as scrap iron entitles a person under Sub-clause 7 of Clause 2 of Section 10 to claim allowance and I direct the Commissioner of Income-tax to state a case to the High Court for that purpose.