Capital expenditure: converting a liability into an enduring asset by filling a pit is not deductible under Section 10(2)(xv).

Expenditure on filling a pit that converted a pre-existing liability and nuisance into levelled, usable ground was characterised as capital, because it created a new enduring asset rather than merely preserving or restoring an existing asset; consequently the outlay does not qualify as a revenue deduction under the income-tax deduction provision invoked. The analysis distinguishes prior authorities where expenditure only maintained existing assets, and treats the liability-to-asset conversion as determinative of capital treatment, producing non-allowability of the claim.

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Issues: Whether the expenditure of Rs. 36,454 incurred in filling up a pit on the assessee's leased mill premises is an allowable deduction under Section 10(2)(xv) of the Income-tax Act.

Analysis: The Court examined whether the expenditure was of a revenue nature (repair/maintenance) or of a capital nature creating an enduring asset. The pit prior to filling was a liability and nuisance; filling it converted that liability into usable, levelled ground on which mill operations could be carried on, thereby creating a new asset of enduring character despite the unexpired lease term. The decision distinguishes earlier authorities where expenditure merely preserved or restored existing assets; here no asset was preserved but a new asset was brought into existence.

Conclusion: The expenditure is capital in nature and not an allowable revenue deduction under Section 10(2)(xv); the question is answered in the negative in favour of the Revenue.

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