Income-tax---

----Business expenditure---Current repairs---Disallowance of expenditure-- Expenditure on repairs and insurance of cars and jeeps is covered by S.31-- Section 37(3A) is not applicable---Expenditure on repair cannot be disallowed---Indian Income Tax Act, 1961, Ss.31 & 37.

Expenditure incurred by the assessee as repair charges of car and jeep would come directly under section 31 of the Income Tax Act, 1961. Section 37(1) takes in cases which are not covered by sections 30 to 36, and the non obstante clause in section 37(3A) does not have the effect of bringing the provisions contained under section 31 also within the purview of section 37(1). Hence, expenditure in respect of repairs and insurance of motor car or jeep cannot be included in the expenditure incurred on running and maintenance of motor cars for the purpose of restriction under section 37(3A). Repairs are governed by section 31 and taxes are regulated under section 30 and such expenditure cannot be construed as running and maintenance expenditure of motor cars described under section 37(3A).

CIT v. A. V.. Thomas & Co. Ltd. (1997) 225 ITR 29 (Ker.) ref.

P.K.R. Menon and N.R.K. Nair for the Commissioner

C.N. Ramachandran Nair for the Assessee.

JUDGMENT

MRS. K. K. USHA, J.---This is a reference under section 256 of the Income Tax Act, 1961, by the Income-tax Appellate Tribunal, Cochin Bench, at the instance of the revenue arising out of the order of the Tribunal in I. T. A. No. 737/Cock of 1987, which relate to the assessment year 1985-86. The following is the question referred for the opinion of this Court:

"Whether, on he facts and in the circumstances of the case, should not the repairs to car and jeep be included for computing the disallowance under section 37(3A) of the Income Tax Act, 1961?"

The fact of the case are as follows: The assessee, a company, had incurred certain expenditure for the repair of motor car and jeep for the assessment year 1985-86. In the return the assessee computed disallowance under section 37(3A) but claimed that no disallowance can be made on these repair charges on the ground that section 37(3A) has no application. The Income-tax Officer took the view that section 37(3A) is applicable and rejected the claim of the assessee. The contention raised by the assessee was accepted by the Commissioner of Income-tax (Appeals), on the appeal filed by the assessee and he directed the Assessing Officer to exclude motor car and jeep repair charges from the computation made by him under section 37(3A) of the Act. While dismissing the appeal filed by the Revenue. the Tribunal upheld the view of the Commissioner of Income-tax (Appeals).

In I. T. R. No. 74 of 1994-CIT v. A. V. Thomas & Co. Ltd. (1997) 225 ITR 29 we had occasion to consider a similar question and we have taken the view that the expenditure incurred by the assessee as repair charges of the car and the jeep would come directly under section 31 of the Income Tax Act, 1961, that section 37(1) takes in cases which are not covered by sections 30 to 36, that the non obstante clause in section 37(3A) does not have the effect of bringing the provisions contained under section 31 also within the purview of section 37 and, therefore, on any claim for deduction in respect of expenditure incurred for repair of the car and jeep section 37(3A) has no application.

We find that the questions framed and referred are slightly confusing. We, therefore, recast the question as follows:

"(1) Whether, on the facts and in the circumstances of the case,--

(i) the expenditure in respect of repairs and insurance of motor car and jeep can be included in the expenditure incurred on running and maintenance of motor cars for the purpose of restriction under section 37(3A) of the Income-tax Act?

(ii) the Tribunal is right in law in holding; repairs are governed by section 31 and taxes are regulated under section 30 such expenditure cannot be construed as running and maintenance expenditure of motor cars described under section 37(3A) of the Act?"

In the light of the discussion as above, we answer question No. 1 (i) in the negative, against the Revenue and in favour of the assessee, question No. l(ii) in the affirmative, against he Revenue and in favour of the assessee.

Registry will forward a copy of this judgment under the seal of this Court and the signature of the Registrar to the Income-tax Appellate Tribunal, Cochin Bench.

M.B.A./3247/FC Reference answered.