Development charges for leasehold industrial land were capital expenditure because they formed part of the lease arrangement and gave enduring benefit.

Development charges paid to secure and complete development of leasehold industrial land were held to be capital expenditure because they formed part of the lease arrangement and related to the development of the land itself. The expenditure was treated as the cost of creating an enduring advantage in making the industrial plot available for lease, rather than a recurring or maintenance outlay.

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Issues: Whether development charges paid to RIICO for development of land leased for industrial plots constituted capital expenditure.

Analysis: The charges were paid in relation to the development of the land itself and formed part of the arrangement under which the assessee obtained the leasehold industrial plot. The expenditure represented the cost of development which, if undertaken by the assessee directly, would have been capital in nature. The development of the industrial belt was integral to making the land available on lease and was not a mere recurring or maintenance expense.

Conclusion: The development charges were capital expenditure.

Ratio Decidendi: Expenditure incurred to secure or complete the development of leasehold industrial land, where such development becomes part of the lease arrangement and confers an enduring advantage, is capital in nature.

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