Capital expenditure on filling a mill pit was not deductible because it created enduring operational advantage.

Expenditure incurred to fill a pit in a mill compound was held to be capital expenditure rather than an allowable revenue deduction under the Income-tax Act, 1922. The work did not merely preserve or repair an existing asset; it removed a liability and nuisance and converted the area into useful ground for the mill's operations. The fact that the pit had been left unused for some time, and that the lease had only an unexpired term, did not prevent the advantage obtained from being enduring in character. The deduction was therefore disallowed and the question was answered in favour of the Revenue.

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Issues: Whether the expenditure incurred for filling up the pit in the mill compound was an allowable deduction as revenue expenditure under section 10(2)(xv) of the Income-tax Act, 1922, or was capital expenditure.

Analysis: The expenditure did not merely preserve or maintain an existing asset. The pit was a liability and a nuisance, and the work done converted it into useful ground capable of being used for the mill's operations. If such filling up would have been capital expenditure when the mills were established, its character did not change because the pit was allowed to remain until it became a nuisance. The unexpired term of the lease did not prevent the resulting advantage from being enduring in character.

Conclusion: The expenditure was capital in nature and was not allowable as a revenue deduction. The question was answered in the negative, in favour of the Revenue.

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