Capital expenditure test for debenture finance commission: payment for enduring business advantage was held non-deductible as revenue expense.

Commission paid to procure debenture finance was treated as capital expenditure because it was incurred to raise borrowing for replacing existing liabilities and strengthening the company's capital structure. The payment was directed to obtaining an asset or advantage of enduring benefit to the business, and the fact that it was spread over years did not alter its character. On that settled test, expenditure made to acquire a capital advantage remains capital in nature even if paid periodically, so it was not deductible as revenue expenditure under section 10(2)(xv).

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Issues: Whether commission paid for procuring debenture finance was deductible as revenue expenditure under section 10(2)(xv) of the Indian Income-tax Act.

Analysis: The commission was paid in connection with raising debenture finance for the company. The borrowing was for replacing existing liabilities and strengthening the capital structure, and the expenditure was directed to obtaining a capital asset or advantage of enduring benefit to the business. The mode of spreading payment over years did not alter its character. On the settled test, expenditure incurred for acquiring capital or an enduring benefit is capital expenditure, even if paid periodically.

Conclusion: The amount was capital expenditure and was not deductible under section 10(2)(xv) of the Indian Income-tax Act. The answer to the reference was against the assessee.

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