1. This Reference raises two points. The assessee's business is that of an owner of motor-cars plying for hire. Only two points were raised before the learned Judge, though the first was raised under two heads. We propose first to dispose of the second contention.
2. The assessee was the owner of a new car which very shortly after it was purchased met with an accident and had to be sold as scrap iron and the learned Judge has held that this entitles him to claim a deduction under Section 10(2)(vii) of the Indian Income Tax Act of 1922 on the footing that this may be treated as having become in the words of the Act 'obsolete.' It seems to us that this is contrary to the plain meaning of the language used. 'Obsolete machinery' means machinery which though it is able to perform its function has become in common parlance out of date and performs its function so indifferently or at such a cost that a prudent man instead of continuing to use such machinery would discard it and instal more labour saving machines. In our opinion, the word 'obsolete' is quite inapplicable to a new car which is wholly useless for its purposes because it has broken to pieces in an accident and, in our opinion, this cannot be allowed as a deduction and we disagree with the learned Judge.
3. A much more difficult point is raised with regard to the second matter which relates to certain items which were disallowed by the Income Tax Authorities as being of the nature of capital expenditure which is excluded from deduction by Section 10(2)(ix). That sub-section allows any expenditure (not being in the nature, of capital expenditure) incurred solely for the purpose of earning the profits or gains of the business. The latter comes to a total of Rs. 3,296-2-2 and it seems reasonably clear that the first three items were additions to the machinery and plant used by the firm, which can clearly be classed under the head of capital expenditure. The largest item is one of Rs. 1,925 which is described as the costs of the old car purchased from Tirali Srinivasa Iyengar. The evidence of the assessee about that which seems to have been accepted, is that he bought the car not to use it as car but to resolve it into its component elements and use the parts for casual repairs to his existing fleet of cars. The remaining items are for the renewal of various parts of the cars actually engaged, in the business of the assessee..
4. The Income Tax Authorities rely upon' a decision in Scotland under the Statute in. vogue at the time, viz., Section XII of the Customs; and Inland Revenue Act of 1878, 41. Vic; Ch. XV. That section directs the Commissioners in assessing the profits and gains of a trade to allow such deductions as they may think just and reasonable to represent the diminished, value by reason of wear and tear during the year of any machinery or appliances used for the purpose of the concern and belonging to the person or company by whom the concern is carried on. Upon that it was held in the case of Caledonia Railway Co. v. Banks 1 Tax Cas. 487 decided in the Court of Exchequer in Scotland that the assessee could not deduct the actual expenses of occasional repairs and renewals and then proceed, to claim an' additional deduction under the general section of the Statute for the same thing under the guise of wear and tear. With that decision no body wishes to quarrel, but it is argued for the assessee that the position under the Indian Statute is quite different because the sections relating to deductions and the sub-sections allowing deductions must be taken to be disjunctive, and it is not an answer to a claim which clearly falls within the words of any one of the sub-sections to say to the assessee that he must be deemed to have obtained that deduction under some other sub-section. Deductions are allowed, such are material for the decision of this case--under Section 10(2)(v), (vi) and (ix). Clause (v) allows a deduction in respect of current repairs to buildings, machinery, plant or furniture, the deduction permitted being the amount paid on account thereof. It is said in this case that the renewal of parts of a machine cannot be treated as a current repair but must be treated as a new addition of capital to enable the machine to be kept in proper running order. It is pointed out that by Clause (vi) of Sub-section (2) a deduction is allowed in respect of depreciation which has been assessed by Government at the not ungenerous figure of 20 per cent, and it is said that the assessee having had the benefit of this large deduction under Clause (vi) cannot get the same deduction over again in another form by having recourse to Clause (v). In our opinion, if the Legislature meant the various reliefs by way of deductions specified in Section 10 of the Act: to be alternative and exclusive they could very easily have said so and, in our opinion, if any deduction claimed false within the express words of any one of the sub-sections it is not open to Government to say that it is really covered by: the general provision of Sub-section (vi). It is obviously arguable that most of the repairs in this case can be described as current repairs though of, course, the matter is one of degree. If a carburetter of a motor-car ceases to, function,-we should incline to the view that the renewal of the carburetter in order to enable the car to keep the road is properly described as running repair. On the other hand, if a car as a result of an accident had nothing left but a wheel and everything else had to be renewed, clearly the sensible view would be that the renewal of the-car could only be described as an increase-of capital. , But apart from that, we have the provision of Sub-section (2)(ix)which speaks in general terms of any expenditure (not being in the nature of capital expenditure) incurred solely for the purpose of earning such profits 'or gain's'. Without committing ourselves to a. view as to, what are current repairs within the meaning of Clause (v), we think it reasonably clear that the cost of repair set forth in the list that wag handed up to us must be treated as: an expenditure incurred for the purpose of earning the profits or gains of the business and we do not think that it can properly be treated as capital expenditure which is excluded from the operation of Clause (ix), If this view be correct, the cost of an old car for the sole, purpose of using bits and parts, of it for carrying out repairs to cars on the road which is the main item in the as3essee's claim for deductions being nearly two-thirds of the whole, stands on the same footing as if he had obtained and used new parts for repairing his fleet of motor-cars from time to time. In this case we feel that the Legislature has done that which is so. often done in Indian Acts and that by enumerating too much and trying to cover every possible case, they have per incurdam given more than one remedy in respect of what is clearly one ground of deduction. But until and unless the Act is amended, we think that-separate heads of reliefs must be treated as disjunctive and cumulative and hold that the deductions claimed except as regards the first three items fall within the express words of Section 10(2)(ix) and that the Scottish case is inapplicable in India, because the Act which the Scottish case interpreted was an Act which only contained deductions: for depreciation, and did not like the Indian Act specify under separate heads other deductions differently described. We do not think it would be right to hold that what I may call the omnibus Clause (vi) can be construed as extinguishing the right to deductions which are specifically outlined and defined in other sub-sections of the Act. We feel the result to be unsatisfactory and to; be one which gives,: more, to the assessee than was intended or indeed is just but the fault is that of the draftsman of the Indian Act who threw into, the section the omnibus clause modeled on Section XII of 41 Vic. Ch. XV without, reflecting that such a clause was not wanted in an Act which contained the specific deductions taken from the later English Finance Acts. The result will be that the appeal is allowed with costs. On the reference there, will be judgment for the Commissioner with costs to be; fixed at Rs. 150.