Temporary factory access road expenditure treated as revenue outlay, with depreciation available if characterised as capital.

Expenditure on a temporary kacha road linking workers' quarters with the factory was treated as revenue expenditure because the structure did not create an asset of enduring nature. On that basis, the outlay was allowable under section 37 of the Income-tax Act, 1961. The analysis also noted that, even if the expense were viewed as capital in nature, the temporary character of the structure would support full depreciation. The tax treatment therefore favoured allowance of the expenditure and supported the assessee's position.

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Issues: Whether expenditure incurred on a kacha road linking workers' quarters with the factory was allowable as revenue expenditure under section 37 of the Income-tax Act, 1961.

Analysis: The road was a temporary kacha structure and did not result in an asset of an enduring nature. On that footing, the expenditure was properly treated as revenue expenditure. Even on the alternative view that the outlay was capital in nature, the temporary character of the structure entitled the assessee to full depreciation.

Conclusion: The expenditure was rightly allowed as revenue expenditure, and the question was answered in favour of the assessee and against the Revenue.

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