The correct answer is option 'C' - Capital expenditure.

Explanation:
The arrangement of piston rings in an engine is done to increase fuel efficiency. This involves the modification or improvement of the engine's design, which is considered a capital expenditure. Here's why:

Definition of Capital Expenditure:
Capital expenditure refers to the expenses incurred for acquiring, enhancing, or maintaining long-term assets with the expectation of generating future benefits. It involves investments in fixed assets such as land, buildings, machinery, equipment, etc., that are essential for the business's operations and have a useful life of more than one year.

Explanation of the Question:
In the given question, the arrangement of piston rings is aimed at increasing fuel efficiency. This modification is a long-term investment as it improves the engine's performance over an extended period. Let's discuss why it is considered a capital expenditure:

1. Long-Term Benefit:
The arrangement of piston rings is expected to have a long-term impact on the engine's fuel efficiency. It will result in cost savings on fuel consumption over the engine's useful life, making it a capital expenditure.

2. Enhancing Fixed Asset:
The engine itself is a fixed asset used in the business operations. By improving its fuel efficiency, the arrangement of piston rings enhances the value and productivity of the engine, making it a capital expenditure.

3. Substantial Cost:
The arrangement of piston rings involves significant costs, including the purchase and installation of the rings, labor costs, and any other associated expenses. These costs are substantial and meet the criteria of a capital expenditure.

4. Future Benefits:
The increased fuel efficiency achieved through the arrangement of piston rings will lead to future benefits such as reduced fuel consumption, lower operating costs, and improved overall performance of the engine. These benefits are expected to be realized over an extended period, making it a capital expenditure.

Conclusion:
Considering the long-term benefits, enhancement of a fixed asset, substantial cost, and future benefits associated with the arrangement of piston rings for increasing fuel efficiency, it falls under the category of capital expenditure.