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Commissioner Of Income Tax v. Travancore Cements Ltd.

Kerala High Court

Sep 22, 1999

Judgment

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Factual and Procedural Background

The assessee is a public limited company engaged in the production of white cement. For the assessment year 1985–86 the assessee incurred expenditure towards repairs of a car and claimed a deduction under section 31(1) of the Income-tax Act, 1961. The assessing officer included motor car expenses and repairs in the aggregate for computing the disallowance under section 37(3A). On appeal, the Commissioner of Income-tax (Appeals) allowed the claim, holding that repairs do not fall within the mischief of S.37(3A). The Appellate Tribunal upheld that view, following an earlier order in the assessee's own case for assessment year 1984–85.

At the instance of the Commissioner of Income-tax, the Appellate Tribunal referred a question of law to the High Court under S.256(1) of the Income-tax Act, 1961: whether the Tribunal was right in law in holding that repairs will not fall within the mischief of S.37(3A). The matter was considered by a Full Bench because Division Bench decisions of this Court had expressed conflicting views on the issue.

Legal Issues Presented

Whether, on the facts and in the circumstances of the case, the repairs of the car will fall within the mischief of section 37(3A) of the Income-tax Act, 1961 (i.e., whether such expenses are subject to the disallowance under S.37(3A)).
Whether the non-obstante clause in S.37(3A) has an overriding effect so as to exclude or override the specific allowance provisions contained in section 31 (and more generally sections 30 to 36) of the Act, as contended by the Revenue, or whether S.37(3A) applies only to expenditures falling within S.37(1).

Arguments of the Parties

Revenue's Arguments

The learned senior standing counsel for the Revenue argued that the repairs of cars do not come within the ambit of section 31 of the Act for the purposes of the present controversy.
The Revenue contended that section 37(3A) is a substantive provision with an overriding effect on all provisions pertaining to allowance of expenditure in computing business income, and that the non-obstante clause in S.37(3A) excludes the provisions contained under section 31; therefore S.37(3A) should apply to the assessee's car-repair expenditure.

Assessee's Arguments

The learned counsel for the assessee contended that S.37(3A) applies only to matters coming under S.37(1) and does not override or operate in respect of the specific allowance provisions contained in sections 30 to 36 (including S.31).
The assessee relied on the textual structure and definitions in the Act (notably that 'plant' in S.43(3) includes motor vehicles and that S.31 specifically permits deductions for repairs and insurance of such 'plant') to argue that repairs are deductible under S.31 and are distinct from running and maintenance which are covered by S.37(3A)/(3B).

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Commissioner Of Income Tax v. M/S. Navodaya (1996 (2) KLT 915 : 1997 225 ITR 399)	Held that subsections of S.37 prefixed by non-obstante clause must be read independently of S.37(1); consequent view that repairs of cars fall within the mischief of S.37(3A).	The Full Bench noted this Division Bench decision represented the contrary view and expressly disagreed with it, holding it did not consider the distinction between repairs under S.31 and maintenance under S.37(3A).
Commissioner Of Income Tax v. A.V. Thomas & Co. Ltd. (1997 (1) KLT 267 : 1997 225 ITR 29)	Held that repairs of cars and insurance premiums are deductible under S.31 and do not fall within the mischief of S.37(3A).	The Full Bench endorsed this approach as the correct one and relied on it in answering the reference in favour of the assessee.
George Williamson (Assam) Ltd. v. C.I.T. (1997) 223 ITR 203	Distinguished "repairs" from "maintenance" (using dictionary meanings) and concluded legislature intended to treat expenses on repairs under S.31 and running/maintenance under S.37(3A)/(3B).	The Full Bench stated its respectful agreement with this reasoning and relied upon it to support the distinction between S.31 and S.37(3A).
C.I.T. v. Chase Bright Steel Ltd. (1989) 177 ITR 124	Held that S.37(3) contemplates allowance of expenditure not covered by Ss.30–36; expenditures allowable under Ss.30/31 cannot be disallowed under S.37(3) (and by analogy S.37 sub-sections).	The Court cited this decision in support of the assessee's contention that S.37 sub-sections cannot override specific allowances under Ss.30–36.
Commissioner of Income-tax v. Thungabhadra Industries Ltd. (1994) 207 ITR 553	Held that S.37(1) covers only expenditure not of the nature described in Ss.30–36 and that S.37(3A)/(3B) cannot be applied to expenditures allowable under Ss.30–36; expenditure under S.31 not within S.37(3A).	The Full Bench relied on and cited this decision as supporting the proposition that S.31 expenses are outside the ambit of S.37(3A).
C.I.T. v. Price Waterhouse (1994) 207 ITR 564	Reiterated that the restriction in S.37(3A)/(3B) cannot be applied to expenditures allowable under Ss.30–36.	Cited by the Full Bench as part of a line of authority supporting the assessee's position.
C.I.T. v. Steel Tubes of India Ltd. (1997) 228 ITR 418	Followed the Calcutta High Court view that repairs of cars are excluded from the purview of S.37(3A).	Noted by the Full Bench as supportive authority from another High Court.
C.I.T. v. Midland Rubbers & Produce Co. (1998) 232 ITR 530	Held that repairs and insurance paid for cars are deductible under S.31 and do not fall within S.37(3A).	The Full Bench followed this view and treated it as consistent with its conclusion.
C.I.T. v. Travancore Cements Ltd. (1997) 138 CTR 51	Division Bench view that expenditure on repairs of cars would come within the mischief of S.37(3A).	The Full Bench observed this earlier Division Bench decision took a contrary view and expressly disagreed with it on the basis that it did not address the repairs vs maintenance distinction.
C.I.T. v. Bharat Industrial Works (1997) 226 ITR 543	Held that expenditure towards maintenance of car would come within the ambit of S.37(3A).	The Bench stated this decision has no direct relevance to the present case (which concerns repairs rather than maintenance) and therefore did not treat it as determinative.
C.I.T. v. K.N. Oil Industries (1997) 226 ITR 547	Addressed whether expenses on repairs and maintenance of cars were fully allowable under S.31; did not consider the interplay of Ss.31 and 37(3A).	The Full Bench observed this decision did not consider the applicability of Ss.31 and 37(3A) and therefore is not relevant to resolving the present question.
Mohan Meakin Breweries Ltd. v. C.I.T. (1979) 118 ITR 101	Held that S.37(3) is a separate head for advertisement expenditure and that the non-obstante clause excludes considerations under S.37(1) (in context of advertising expenditure).	The Full Bench observed the facts in that case are not similar to the present case and therefore the decision does not assist the Revenue on the specific question before the Court.

Court's Reasoning and Analysis

The Full Bench's analysis proceeds by examining the text and structure of the relevant statutory provisions and the definitions in the Act, and by distinguishing between the different categories of expenditure that the statute addresses.

Key statutory provisions and textual points relied on by the Court:

Section 31 specifically allows deductions "in respect of repairs and insurance of machinery, plant or furniture used for the purposes of the business or profession", and the definition of "plant" in S.43(3) expressly includes motor vehicles (including motor cars). Thus expenditure for repairs and insurance of motor cars falls within S.31.
Section 37(1) is a general provision permitting deduction of expenditure "not being expenditure of the nature described in Ss.30 to 36" and not being capital or personal expenditure. The wording therefore expressly excludes items covered by Ss.30–36 from S.37(1).
The non-obstante clause in S.37(3A) reads "Notwithstanding anything contained in sub-s. (1)" and limits its application to specified items in S.37(3B) (which includes "(ii) running and maintenance of aircraft and motor cars"). The Court reads this clause as applying to items that fall within the scope of S.37(1) and the specific items enumerated in S.37(3B).

Analytical steps and conclusions:

The Court emphasized the statutory distinction between "repairs" (S.31) and "running and maintenance" (S.37(3B)(ii)), noting that the legislature used different words and thus intended to treat these as different categories of expenditure. The Court cited the Gauhati High Court decision in George Williamson (Assam) Ltd. v. C.I.T. which analysed dictionary meanings to support the distinction.
Because S.31 explicitly covers repairs and insurance of "plant" (which includes motor vehicles), such expenditure is within Ss.30–36 and is therefore expressly excluded from the operation of S.37(1). Since S.37(3A) operates "notwithstanding anything contained in sub-s. (1)", the Court held that the non-obstante clause in S.37(3A) relates only to items that fall under S.37(1) and are specified in S.37(3B); it does not override or extend to items already dealt with under Ss.30–36.
The Court reviewed the case-law: it accepted a line of authority (Bombay High Court, Calcutta High Court, Madhya Pradesh High Court and Division Bench decisions of this Court such as A.V. Thomas and Midland Rubbers) that reads S.37(3A) as not applicable to expenditure covered by S.31. It found that the contrary Division Bench decisions (Navodaya and Travancore Cements) had not sufficiently considered the repairs-versus-maintenance distinction and therefore did not persuade the Full Bench.
Applying the statutory text and the accepted distinction, the Full Bench concluded that the expenditure on repairs and insurance of motor cars is deductible under S.31 and does not fall within the mischief of S.37(3A). The Court expressly disagreed with earlier Division Bench decisions that had applied S.37(3A) to car repairs.

Holding and Implications

Holding: The reference is answered in favour of the assessee and against the Revenue.

Direct effect on the parties: The Full Bench held that the expenditure towards repairs of the car and the premium paid towards insurance are deductible under section 31 of the Income-tax Act and do not fall within the mischief of section 37(3A). Consequently, the Tribunal and the Commissioner of Income-tax (Appeals) were correct in allowing the deduction claimed by the assessee for the assessment year in question.

Broader implications: The opinion limits the application of the non-obstante clause in S.37(3A) to items that fall under S.37(1) (i.e., items not covered by Ss.30–36). The Court did not frame any additional broad rule beyond its textual analysis and the resolution of conflicting bench decisions; the decision resolves the reference between the parties and disagrees with the earlier Division Bench decisions that treated repairs as falling within S.37(3A).

Show all summary ...

R. Rajendra Babu, J.:— The question that is referred for consideration of the Full Bench is whether the expenses met by the assessee for the repairs of the car will not fall within the mischief of S. 37(3A) of the Income-tax Act, 1961.

2. A Division Bench of this Court in ITR 83/1993 answered the question in the affirmative in favour of the Revenue following the earlier decision of the same Bench in Commissioner Of Income Tax v. M/S. Navodaya, (1996 (2) KLT 915 : (1997) 225 ITR 399). Another Bench of this Court including one of us (Usha, J.) took a contrary view in Commissioner Of Income Tax v. A.V Thomas & Co. Ltd. (1997 (1) KLT 267 : (1997) 225 ITR 29). Since the judgment pronounced by one Beneh of this Court in 1997 (1) KLT 267 : (1997) 225 ITR 29 and another Bench in 1996 (2) KLT 915 : (1997) 225 ITR 399 contain contrary views in the matter, the question was referred to this Full Bench for consideration and decision. The assessee was a Public Limited Co. engaged in the production of while cement For the assessment year 1985–86 the assessee met expenditure towards car repairs. The assessing authority included the motor car expenses and expenses for repairs of the cars in the aggregate expenses for the purpose of computing disallowance under S. 37(3A) of the Income-tax Act (for short ‘the Act’). On appeal, the Commissioner of Income-tax (Appeals) held that the repairs will not fall within the mischief of S. 37(3A) and allowed the claim of the assessee. On further appeal at the instance of the Revenue, the Tribunal upheld the order of the Commissioner of Income-tax and held that the repairs of the car will not fall within the mischief of S. 37(3 A) of the Act The Tribunal upheld the order of the Commissioner of Income-tax following its earlier order in the assessee's own case for the assessment year 1984–85. At the instance of the Commissioner of Income-tax, the Appellate Tribunal referred the following question of law for the opinion of this Court under S. 256(1) of the Income-tax Act, 1961:—

“Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in holding that the repairs will not fall within the mischief of S. 37(3A) of the Income-tax Act, 1961?”

3. The assessee-company had incurred certain expenditure towards repairs of car and claimed deduction under S. 31(1) of the Act. The Commissioner of Income-tax as well as the Tribunal held that the repairs of the car will not fall within the mischief of S. 37(3 A) and the assessee will be entitled to claim deduction under S. 31(1) of the Act. The i earned senior standing counsel for the Revenue argued that the repairs of cars will no t come within the ambit of S. 31 of the Act, that S. 37(3A) was a substantive pro vision which had an overriding effect on all the provisions in the Act pertaining to allowance of expenditure in computing the income from the business and profession and the non-obstante clause in S. 37(3A) would exclude the provisions contained under S. 31 of the Act and therefore, the provisions contained in S. 37(3 A) would be applicable in the case of the assessee. The learned counsel for the assessee would contend that S. 37(3A) of the Act would take in only those matters which come under S. 37(1) and it shall not have any overriding effect in respect of the other provisions pertaining to the allowances of expenditure under Ss. 30 to 36 of the Act For a proper appreciation of the rival arguments, it would be convenient to refer to the relevant provisions of law. S. 31 reads as follows:

“Repairs and insurance of machinery, plant and furniture.— In respect of repairs and insurance of machinery, plant or furniture used or the purposes of the business or profession, the following deductions shall be allowed—

(i) the amount paid on account of current repairs thereto;

(i) the amount of any premium paid in respect of insurance against risk of damage or destruction thereof.” “Plant” as defined in S. 43(3) of the Act includes all motor vehicles including motor car. Thus a reading of S. 31 would reveal that the expenditure met towards repairs and the insurance of motor care would come within the ambit of S. 31.

4. Section 37(1) reads:

“Any expenditure (not being expenditure of the nature described in Ss. 30 to 36 and S. 80 VV and not being in the nature of capital expenditure or personal expenses of the assessee). laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head “profits and gains of business or profession”.

(emphasis supplied)

5. A plain reading of sub-s. (1) of S. 37 would make it clear that the deductions referred to under Ss. 30 to 36 are excluded from the purview of S. 37(1). Sub-s. 37(3A) reads:

“Notwithstanding anything contained in sub-s. (1), where the expenditure or, as the case may be, the aggregate expenditure incurred by an assessee on any one or more of the items specified in sub-s. (3B) exceeds one hundred thousand rupees, twenty per cent of such excess shall not be allowed as deduction in computing the income chargeable under the head “profits and gains of business or profession”.

(emphasis supplied)

6. The relevant portion of sub-s. (3B) reads:

“The expenditure referred to in sub-s. (3 A) is that incurred on—

(i) advertisement, publicity and sales promotion; or

(ii) running and maintenance of aircraft and motor cars; or

(iii) payments made to hotels”.

7. The underlined portion of S. 37(1) would make it clear that S. 37(1) is intended to take in only such expenditure which are not covered by Ss. 30 to 36 and S. 80W and not in the nature of a capital expenditure or personal expenses and those items of expenses met by an assessee are specifically excluded from the ambit of S. 37(1). S. 37(3A) of the Act provides that notwithstanding anything contained in sub-s. (1), 20% of any expenditure in excess of Rs. 1 lakh incurred by an assessee in respect of one or more of the items specified in sub-s. (3B) shall not be allowed as a deduction in computing the business income. The underlined portion in sub-s. (3A) would make it clear that it would apply only to those items of expenditure covered by sub-s. (3B). Clause (ii) in sub-s. (3B) specifies one such expenditure as “running and maintenance of aircraft and motor cars”. The deduction in respect of expenditure incurred on repairs and insurance of motor cars is allowable under S. 31 of the Act, as ‘plant’ as defined in S. 43(3) of the Act takes in motor vehicles. The definition of ‘plant’ in S. 43(3) reads:

“Plant includes ships, vehicles, books, scientific apparatus and surgical equipments used for the purpose of the business or profession”.

8. The definition of plant takes in all types of vehicles, including all types of motor vehicles. Clause (ii) of S. 3(B) deals with the running and maintenance of aircrafts and motor cars. The expenditure in respect of ‘running and maintenance of aircrafts and motor cars’ are the two items coming within clause (ii) of sub-s. (3B). S. 31 relates to the expenditure regarding repairs and premium paid in respect of insurance of plant which takes in different items including all types of motor vehicles whereas the expenditure incurred on running and maintenance of aircrafts and motor cars are the two specific items covered by clause (ii) of S. 37(3B) of the Act Further restrictions are imposed in respect of the expenditure dealt with in clause (ii) of sub-s. (3B) by sub-ss. (3C) and (3D) of the Act Thus it is clear that the expenditure towards repairs of car and the payment of premium are specifically dealt with under S. 31 of the Act and the expenditure towards the running and maintenance of car, which is an entirely different item of expenditure, is dealt with under S. 37(3A) of the Act. A consideration of the above provisions would make it clear that the non-obstante clause in sub-s. (3 A) would relate only to such of the expenditure referred to in S. 37(1) and specified in S. 37(3B). The expenditure in respect of which sub-s. (3A) of S. 37 can be attracted, in the ordinarily course, can only be those items of expenditure which fall under S. 37(1) and S. 37(1) takes in only such expenditure which does not fall within Ss. 30 to 36 and S. 80V V and not being in the nature of capital expenditure or personal expenditure.

9. The expenditure on repairs contemplated under S. 31 is entirely different from the expenditure towards maintenance contemplated in S. 37(3B). This aspect was considered by the Gauhati High Court in George Williamson (Assam) Ltd. v. C.I.T (1997) 223 ITR 203. That was a case where the assessee company claimed deduction of some amount towards cost of repairs of motor vehicle. The assessing authority disallowed the claim and that was confirmed by the appellate authority as well as by the Tribunal. There a Division Bench of the High Court of Gauhati held:

“In our opinion, the expressions “repairs” and “maintenance” are two different expressions. In this connection, we may refer to the dictionary meaning of the expressions “repairs” and “maintenance”. As per Black's Law Dictionary (fifth Edn.), “repair” means “to mend, remedy restore, renovate. To restore to a sound or good state after decay, injury, dilapidation, or partial destruction”. Whereas the meaning of the expression, “maintenance” is “Act of maintaining, keeping, supporting……………”. From the dictionary meaning of these two expressions it is clear that the expression “repair” presupposes certain injury or partial destruction. But the expression “maintenance” does not do so. It means to keep a particular thing in its similar state. Therefore, in our opinion, the Legislature being fully aware of the difference of expression dealt with “expenses on repairs” in S. 31 and “expenses for running and maintenance” in S. 37(3 A) and (3B)”.

10. We are in respectful agreement with the view taken in the above decision that the expenditure on ‘repairs’ dealt with under S. 31 of the Act is entirely different from the expenditure on maintenance covered by sub-s. (3A) and (3B) of S. 37 of the Act.

11. Section 37 is a ‘general’ provision regarding the expenditure not covered by Ss. 30 to 36 and S. 80W and not being in the nature of capital expenditure or personal expenses of the assessee. Sub-s. (1) of S. 37 makes it so clear. Sub-ss. (2) and (2A) imposes certain restrictions in allowing deduction to the expenditure in the form of entertainment expenditure notwithstanding sub-s. (1) of S. 37. Sub-s. (2B) says that notwithstanding anything contained in S. 37(1), no allowance shall be made in respect of any expenditure incurred on advertisement in any souvenir, brochure, tract, pamphlet or the like published by the political party. Sub-s. (3) imposes a restriction that notwithstanding sub-s. (1), the expenditure towards advertisement or on maintenance of residential accommodation including guest house or in connection with the travelling of an employee, shall be allowed only to the prescribed limit Sub-s. (3A) makes certain restrictions in allowing the expenditure on the items mentioned in sub-s. (3B) notwithstanding S. 37(1). Sub-s. (3B) deals with the following items of expenditure: (i) advertisement, publicity and sales promotion, (ii) running and maintenance of aircraft and motor cars, and (iii) payment made to hotels. Sub-s. (3C) and (3D) also deal with some of the items of expenditure covered by sub-s. (3B). Sub-s. (4) deals with further restrictions on the allowance of expenditure on maintenance of residential accommodation in the nature of guesthouse. Sub-s. (5) clarifies what is accommodation in the nature of guest house. On going though the above provisions, it is clear that the expenditure covered by all the sub-sections of S. 37 are items of expenditure not covered by Ss. 30 to 36. Hence the items of expenditure covered by Ss. 30 to 36 are different from the items of expenditure covered by the different sub-sections of S. 37. The above circumstances also would make it clear that the non-obstante clause in S. 37(3 A) applies only to those of the items covered by S. 37(1) and it cannot have any overriding effect in respect of the other provisions pertaining to the allowance of expenditure under Ss. 30 to 36 of the Act.

12. The learned counsel for the assessee relying on a decision of a Division Bench of the Bombay High Court in C.I.T v. Chase Bright Steel Ltd. (1989) 177 ITR 124 argued that the expenditure allowable under Ss. 30 and 31 of the Act cannot be disallowed under any of the provisions of the sub-sections of S. 37. In the above case, the learned counsel for the Department had advanced an argument that S. 37(3) was a substantive provision which has an overriding effect on all the provisions in the Act pertaining to allowance of expenditure in computing the income from the business and profession and that the provision contained in S. 37(3) specifically covered all kinds of expenses incurred in connection with the guest house maintained by the assessee for the purpose of its business. There the Division Bench of the Bombay High Court held that S. 37(3) contemplates allowance of expenditure which was neither personal nor of capital nature nor which was of the nature prescribed under S. 30 to 36 of the Act and rent which was allowable under S. 30 and the expenditure relating to the repairs of the furniture falling under S. 31 could not again fall for consideration under S. 37(3A) of the Act.

13. In Commissioner of Income-tax v. Thungabhadra Industries Ltd. (1994) 207 ITR 553, the Calcutta High Court also had taken the same view. There it was held that S. 37(1) covered only expenditure not being expenditure of the nature described in Ss. 30 to 36 and the restriction or limitation as contained in S. 37(3A) or 37(3B) cannot have any manner of application to the expenditure allowable under Ss. 30 to 36 and the expenditure allowable under S. 31 cannot come within the purview of S. 37(3A). There it was further held that only such expenditure which falls under S. 37 can be brought within the net of restriction made in S. 37(3B). The same view was reiterated by the above Court in C.I.T v. Price Waterhouse (1994) 207 ITR 564. A Division Bench of the High Court of Madhya Pradesh in C.I.T v. Steel Tubes of India Ltd. (1997) 228 ITR 418 followed the decision of the Calcutta High Court in (1994) 177 ITR 124 and held that repairs of cars are to be excluded from the purview of S. 37(3A).

14. A Division Bench of this Court in C.I.T v. A.V Thomas & Co. Ltd. (1997 (1) KLT 267 : (1997) 225 ITR 29 and in C.I.T v. Midland Rubbers & Produce Co. (1998) 232 ITR 530, following the decisions of the High Courts of Bombay and Calcutta in the decisions cited supra held that the repairs of car and the premium paid towards insurance are to be deducted under S. 31 of the Act and such expenditure shall not come within the mischief of S. 37(3 A) of the Act. The above decisions were pronounced on 10.1.1997 without noticing the earlier decisions of another Bench of this Court in 1996 (2) KLT 915 : (1997) 225 ITR 399 and (1997) 138 CTR 51 pronounced in September and November 1996. In C.I.T v. Navodaya, (1996 (2) KLT 915 : (1997) 225 ITR 399 and in C.I.T v. Travancore Cements Ltd., (1997) 138 CTR 51 (the assessee in the present case) a Division Bench of this Court took the view that the expenditure on repairs of car also would come within the mischief of S. 37(3 A) of the Act In (1997) 225 ITR 399 it was held:

“Each of the subsequent sub-sections of S. 37 is prefixed by the same non-obstante clause: “Notwithstanding anything contained in sub-s. (1).” These sub-sections have to be read de hors the statutory provisions of S. 37 (1). Each one of the sub-sections other than S. 37 (1) of the Act, would have to be understood as contemplating a separate and distinct head of deduction. Considerations which are contemplated by S. 3 (1) are of applicable. Once it is found that a particular deduction is referable to the concerned sub-section applicable to the factual matrix, deduction would be said to squarely fall within the provisions of the concerned sub-section. Obviously therefore, the situation whether the expenditure is of a capital nature or of a revenue nature would pale into insignificance and would obviously be wholly to be left out of consideration. This is the obvious meaning of the non-obstante clause, and in the context it would have to be emphasised that this non-obstante clause is prefix to all the concerned subsections of S. 37 of the Act.”

15. In support of the argument of the learned counsel appearing for the Revenue, reliance was placed on the decisions of the Madhya Pradesh High Court in C.I.T v. Bharat Industrial Works (1997) 226 ITR 543 and C.I.T v. K.N Oil Industries (1997) 226 ITR 547. In the case of Bharat Industrial Works the question was whether 20% of the expenditure in excess of Rs. 1 lakh towards running and maintenance of care can be disallowed under S. 37(3A) of the Act There it was held that the expenditure towards maintenance of car would come within the ambit of S. 37(3A) of the Act In fact the above decision has no relevance in the present case. In (1997) 226 ITR 547 the question was whether the expenses on repairs and maintenance of cars were fully allowable under S. 31 of the Act There it was held that it was not fully allowable under S. 31 of the Act The applicability of Ss. 31 and 37(3A) was not considered and the above decision also is not relevant for resolving the question in controversy. The decision of the High Court of Himachal Pradesh in Mohan Meakin Breweries ltd v. C.I.T (1979) 118 ITR 101 relied on by the Revenue also is of no avail to substantiate the case of the Revenue. That was a case where the Court had to consider whether the expenditure met towards the cost and installation charges of neon-signs put up for advertising die products of the company at different places in various towns in India, including those at the dealers’ premises, was an expenditure of a capital nature or a claim of the assessee under sub-s. (3) of S. 37 of the Income-tax Act can be allowed. Therein it was held:

“It is obvious from the provisions of sub-s. (3) quoted above that it contemplates an altogether separate and distinct head of deduction, namely, expenditure on advertisement It is further dear that this deduction on account of expenditure on advertisement is admissible ‘notwithstanding anything contained in sub-s. (1)’. The use of the non obstante clause in sub-s. (3) clearly occludes the considerations which are contemplated by sub-s. (1) of S. 37. It, therefore, follows that if once it is found that a particular deduction can be claimed as on account of expenditure on advertisement the said deduction squarely falls within sub-s. (3) and that being so the question whether the said expenditure is of capital nature or of revenue nature falls wholly out of consideration. Deduction on account of expenditure on advertisement is qua advertisement and cot qua its revenue or capital nature. The Tribunal seems to have missed this aspect of the matter. We, therefore, find that this expenditure falling under sub-s. (3) of S. 37 should be treated as expenditure on advertisement and deduction on that account should be given not on consideration of the question whether it is of revenue or capital nature, but on considerations of the conditions and restrictions contemplated by sub-s. (3) itself.”

16. The facts of the above case do not have any similarity with the facts of the present case and the above decision also is of no avail in resolving the controversy.

17. In C.I.T v. Navodaya, 1996 (2) KLT 915 : (1997) 225 ITR 399 and in C.I.T v. Travmcore Cements Ltd. (1997) 138 CTR 51, the Division Bench has not considered an the aspects of the case. It did not consider the aspect that the expenditure on repairs of cars is a separate and distinct item of expenditure covered by S. 31 whereas maintenance of car is a separate and distinct item of expenditure coining within sub-s. (3A) and (3B) of S. 37. It did not consider that all the sub-sections deal with certain specific item of expenditure which were not dealt under any of the provisions of Ss. 30 to 36. We have carefully examined the matter in detail. As the expenditure on repairs of vehicles including motor cars are covered by S. 31 of the Act which is specifically excluded from the ambit of S. 31(1) of the Act, S. 37(3A) which has application only in respect of the item mentioned in S. 37(3B) of the Act, the non-obstante clause in S. 37(3A) shall not have any overriding effect in respect of the other provisions pertaining to the allowances of expenditure under Ss. 30 to 36 of the Act The expenditure towards repairs and premium paid towards insurance of motor cars is deductible under S. 31 of the Act and the same expenditures will not fall within the mischief of S. 37(A) of the Act We respectfully disagree with the view taken by the Division Bench in 1996 (2) KLT 915 : (1997) 225 ITR 399 and in (1997) 138 CTR 51. The correct approach was made by the Division Bench of this Court in C.I.T v. A.V Thomas & Co. Ltd. 1997 (1) KLT 267 : (1997) 225 ITR 29 and in C.I.T v. Midland Rubbers & Produce Co. (1998) 232 ITR 530. The reference is answered in favour of the assessee and against the Revenue.

18. A copy of this judgment under the seal of the Court and the signature of the Registrar shall be forwarded to Income-tax Appellate Tribunal, Cochin Bench, as required by law.