Settling allowance for factory relocation treated as revenue expenditure and allowed as a deduction.

Settling allowance paid to employees in connection with shifting a factory was treated as revenue expenditure because it was compensatory in nature and did not create any asset or enduring advantage for the assessee. The payment was distinguished from expenditure on shifting plant and machinery, as it was not incurred to acquire, improve, or preserve a capital asset. The allowance was therefore admissible as a deduction.

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Issues: Whether settling allowance paid to employees in connection with shifting of a factory is allowable as a revenue deduction or is capital expenditure.

Analysis: The payment was made to employees as settling allowance on account of the factory shift and did not bring into existence any asset or advantage of enduring nature to the assessee. The expenditure was distinguishable from the shifting of plant and machinery considered in the cited Supreme Court decision, because the present payment was compensatory in nature and not incurred for acquiring or improving a capital asset.

Conclusion: The allowance was revenue expenditure and was admissible as a deduction in favour of the assessee.

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