Capital expenditure on failed lease acquisition remained non-deductible despite the lease proving ineffective.

Stamp duty paid to obtain leasehold premises for a mill was held to be capital expenditure, because the outlay was made with a view to acquiring a capital asset or enduring advantage. The fact that the intended lease ultimately proved ineffective did not change the character of the expenditure, since success or failure of the venture does not determine whether the payment is capital or revenue in nature. The amount was therefore not allowable as a revenue deduction under section 10(2)(xv) of the Income-tax Act.

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Issues: Whether stamp duty paid on an ineffective lease could be claimed as revenue expenditure under section 10(2)(xv) of the Income-tax Act.

Analysis: The expenditure was incurred to obtain leasehold premises for running the mill, and such acquisition would ordinarily be a capital asset. The fact that the lease ultimately proved ineffective did not alter the character of the outlay, because expenditure made with a view to bringing into existence a capital asset or enduring advantage is attributable to capital even if the intended result is not achieved. The authorities on unsuccessful attempts to secure licences or other capital advantages were treated as supporting the principle that the success or failure of the venture does not determine the nature of the expenditure.

Conclusion: The amount of Rs. 4,680-13-0 was capital expenditure and was not allowable as a revenue deduction.

Ratio Decidendi: Expenditure incurred with a view to acquiring a capital asset is capital in nature even if the attempt fails and no asset is ultimately obtained.

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