Development charges to make allotted land usable are capital expenditure when they create enduring advantage in the capital field.

Development charges paid to RIICO for land allotted for an industrial unit were treated as capital expenditure because the outlay made the land fit for use and conferred an enduring advantage in the capital field, placing it in fixed capital rather than circulating capital. The Rajasthan HC also noted that the proposed issue on disallowance out of car expenses and depreciation on car was not answered, as it was treated as a pure question of fact and the reference lacked sufficient facts on that point.

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Issues: Whether development charges paid to RIICO were capital expenditure, and whether the question regarding disallowance out of car expenses and depreciation on car could be answered as a question of law.

Analysis: The development charges were incurred in relation to land allotted by RIICO and brought the land into a workable condition for setting up the industrial unit. The expenditure conferred an enduring advantage in the capital field and was therefore attributable to fixed capital rather than circulating capital. The second question was not answered because it was treated as a pure question of fact for which no sufficient facts were stated in the reference.

Conclusion: The development charges were rightly treated as capital expenditure, and the first question was answered against the assessee. The second question was declined to be answered.

Final Conclusion: The reference was disposed of with the revenue succeeding on the principal issue, while the other proposed question was not adjudicated on merits.

Ratio Decidendi: Expenditure incurred to make land usable for the establishment of a business unit, and which secures an enduring advantage in the capital field, is capital expenditure.

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