Revenue expenditure treatment for shifting an administrative office after amalgamation allowed as business deduction.

Expenditure incurred for shifting the administrative office from Madurai to Bangalore after amalgamation was treated as revenue expenditure because it related to the continuing business and merely changed the location of administrative control. The shift did not create any enduring advantage in the capital field; improved convenience and efficiency were insufficient to convert the outlay into capital expenditure. The amount was therefore allowable as business expenditure and deductible in computing business income.

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Issues: Whether the expenditure incurred in shifting the administrative office from Madurai to Bangalore after amalgamation was capital expenditure or revenue expenditure allowable in the computation of business income.

Analysis: The expenditure was incurred in relation to the continuing business of the company and only changed the place from which administrative control was exercised. No enduring advantage in the capital field was obtained merely because the shift followed amalgamation. Improvement in convenience and efficiency did not convert the outlay into capital expenditure.

Conclusion: The expenditure was revenue in nature and was allowable as business expenditure; the question was answered in favour of the assessee and against the Revenue.

Final Conclusion: The assessee succeeded on the reference and the amount spent for shifting the administrative office was held deductible as revenue expenditure.

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