Leasehold improvement expenditure treated as revenue where the benefit was limited to the lease term and no enduring advantage arose.

Expenditure incurred by a lessee on improvements to leasehold premises was treated as revenue expenditure because it was made for better enjoyment of the property and the benefit was co-terminous with the lease term. The construction of a bedding for an oil engine and a room for storing cloth did not create any enduring advantage beyond the lease period, and the earlier depreciation claim was withdrawn only because the assessee was not the owner of the structure. The expenditure was therefore not capital in nature and was allowable as revenue expenditure.

---

---

Issues: Whether expenditure incurred by a lessee on construction of a bedding for installation of an oil engine and a room for storing manufactured cloth was capital expenditure or revenue expenditure, having regard to section 32(1A) of the Income-tax Act, 1961.

Analysis: The expenditure was incurred on improvements to leasehold premises for better enjoyment of the property. The depreciation earlier granted was withdrawn on the ground that the assessee was not the owner of the structure. No material showed that the construction resulted in any enduring advantage beyond the lease term, and the benefit obtained by the assessee was co-terminous with the lease.

Conclusion: The expenditure was not capital in nature and was allowable as revenue expenditure.

---