Building tax as capital expenditure: one-time levy on construction was held not deductible under business expense provisions.

Building tax paid under the Kerala Building Tax Act, 1975 was treated as a one-time levy attached to completion of construction and perfection of title, making it capital expenditure rather than revenue expenditure. Because section 30(b) covers municipal taxes and similar recurring outgoings, the deduction was held unavailable under that provision. Section 37(1) also could not apply, as it permits only revenue expenditure and cannot be used for an item of capital character outside section 30. The claim for deduction was therefore rejected.

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Issues: Whether building tax paid under the Kerala Building Tax Act, 1975, is allowable as business expenditure under section 30(b) or section 37(1) of the Income-tax Act, 1961.

Analysis: The amount was paid on completion of construction and was a charge on the building itself. It was not a recurring liability like municipal tax, but a one-time levy connected with the acquisition and perfection of title to the capital asset. Section 30(b) specifically allows municipal taxes and similar recurring outgoings, while the statutory scheme does not extend that deduction to building tax. The expenditure was therefore treated as capital in nature and not as revenue expenditure. The residuary provision in section 37(1) was also held inapplicable because that provision permits only revenue expenditure and cannot be used to claim a deduction for an item specifically outside section 30 and of capital character.

Conclusion: The question was answered against the assessee and in favour of the Revenue; building tax paid under the Kerala Building Tax Act, 1975, is not allowable as business expenditure under section 30(b) or section 37(1) of the Income-tax Act, 1961.

Ratio Decidendi: A one-time statutory levy on construction that is incurred to perfect title to a capital asset is capital expenditure and is not deductible either under the specific deduction for recurring taxes or under the residuary provision for revenue expenditure.

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