Revenue expenditure for removing an occupant from leased premises was allowed as a business deduction

Payment made to secure vacant possession of leased premises and remove an unauthorised occupant was held to be revenue expenditure because it was incurred to clear an impediment to the existing business use of the property. The assessee already held a leasehold interest and was engaged in letting out properties; the outlay did not create any new leasehold, tenancy right, or other enduring asset, and was commercially expedient to enable immediate re-letting at a higher rent. It was therefore allowable as a business deduction.

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Issues: Whether the amount paid to secure vacant possession of leased premises and remove an unauthorised occupant was allowable as business expenditure, or was capital in nature.

Analysis: The assessee was already carrying on the business of letting out properties and had a leasehold interest in the premises. The payment was made to remove an impediment to the commercial exploitation of that existing business asset and did not bring into existence any new leasehold, tenancy right, or other enduring asset. The occupant had no privity of contract with the assessee, and the expenditure was incurred on grounds of commercial expediency to enable immediate re-letting at a higher rent.

Conclusion: The payment was revenue expenditure and an allowable business deduction.

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