Enduring land improvements are capital expenditure and not deductible, even where the assessee holds only a licence.

Expenditure incurred to reclaim land and make lasting improvements for a petrol pump, including filling ditches, raising the land and constructing a wall, is capital in nature and not deductible as revenue expenditure in computing income under section 10 of the Income-tax Act, 1922. The fact that the assessee held only a licence over the land did not change the character of the outlay, because the works created an enduring advantage and were incurred for capital purposes. The reference was answered against the assessee, and the alternative deduction question did not survive.

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Issues: Whether the expenditure incurred for reclaiming land and improving it for installation of a petrol pump was capital expenditure disallowable in computation of income under section 10 of the Income-tax Act, 1922.

Analysis: The amount was spent on filling ditches, raising the land, and constructing a wall, all of which brought about lasting improvements to the property. The fact that the assessee held only a licence over the land did not alter the character of the outlay. Expenditure which produces an enduring advantage and is incurred for capital purposes cannot be deducted as revenue expenditure in computing assessable income.

Conclusion: The expenditure was rightly treated as capital expenditure and was not deductible under section 10.

Final Conclusion: The reference was answered against the assessee on the capital nature of the expenditure, and the alternative deduction question did not survive.

Ratio Decidendi: Expenditure incurred on enduring improvements to land is capital expenditure and is not deductible in computing taxable income merely because the assessee holds only a licence over the property.

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