Revenue expenditure for coal stowing operations was deductible because it formed part of the business profit-making process.

Stowing expenditure in coal mining was treated as revenue expenditure because it was incurred as an operational step to make extraction feasible in the relevant year and as part of the profit-earning process. Applying ordinary commercial principles, the court held that the outgoing was dictated by business necessity and expediency and was not directed to bringing into existence an asset or enduring advantage. The incidental fact that stowing may have enabled continued extraction for some years did not change its true character. The expenditure was therefore deductible under section 10(2)(xv) of the Income-tax Act, 1922, in favour of the assessee.

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Issues: Whether the amount spent on stowing operations in coal mining was capital expenditure or revenue expenditure and was deductible under section 10(2)(xv) of the Income-tax Act, 1922.

Analysis: The expenditure was incurred to make coal extraction feasible during the relevant year and formed an operational step in the assessee's business. It was incurred as part of the profit-earning process, for business necessity and expediency, and not with the object of bringing into existence an asset or advantage of an enduring nature. The fact that the stowing may incidentally have enabled continued extraction for some years did not alter its true character, which had to be judged from the aim and object of the outgoing and from ordinary commercial principles.

Conclusion: The expenditure was revenue expenditure and was deductible; the question was answered in favour of the assessee.

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