Ajit K.Sengupta, J. - (1.) At the instance of the Commissioner of Income-tax, the following question of law has been referred to this court under Section 256(1) of the Income-tax Act, 1961, for the assessment year 1977-78 : " Whether, on the facts and in the circumstances of the case, the Tribunal is correct in law in treating the cost of replacement of petrol engines of trucks by diesel engines as revenue expenditure and in that view, deleting the sum of Rs. 59,803 added by the Income-tax Officer ? "
(2.) Shortly stated, the facts are that the Income-tax Officer disallowed a sum of Rs. 89,704 representing the cost of three diesel engines fitted in trucks in place of petrol engines treating it as capital expenditure. On appeal, the Commissioner of Income-tax (Appeals) held that the expenditure for replacement of diesel engines in place of petrol engines of trucks was revenue in nature. He, however, found that the actual expenditure incurred for this purpose amounted to Rs. 59,883. He, therefore, reduced the disallowance to that extent. On further appeal, the Tribunal upheld the order of the Commissioner of Income-tax (Appeals) holding that the expenditure for replacement of petrol engines by diesel engines was of revenue nature. Accordingly, the expenditure was allowed.
(3.) At the hearing, it has been urged on behalf of the Revenue that the expenditure incurred by the assessee for replacement of petrol engines by diesel engines of the trucks was attributable to capital account as the same was not only made once and for all but it was incurred with a view to obtaining an advantage of enduring benefit to the assessee. It is also contended that replacement of petrol engines by diesel engines was a substantial replacement and, accordingly, it was of a capital nature.;