Betterment contribution under town planning scheme treated as revenue expenditure because it only facilitated business operations.

A compulsory betterment contribution levied under a town planning scheme, imposed because development of the area had increased or was likely to increase the land's value, was treated as revenue expenditure where it did not bring any asset into existence or enlarge the assessee's profit-making apparatus. The levy merely funded facilities such as roads and drainage that facilitated the factory's business operations, so its character was connected with the use of those facilities rather than an enduring advantage in the capital field. The deduction was therefore admissible in computing business income and the issue was answered against the Revenue.

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Issues: Whether the betterment contribution paid under the town planning scheme was capital expenditure and therefore not allowable as a business deduction.

Analysis: The liability arose because the local authority, acting under the town planning provisions, levied a compulsory contribution when development of the area had caused, or was likely to cause, an increase in the market value of the land. The levy did not bring into existence any asset for the assessee and did not enlarge its profit-making apparatus. The development merely resulted in additional facilities, such as roads and drainage, which facilitated the business operations of the factory. The contribution was computed with reference to the rise in value, but its true character was that of a payment connected with the availability of those facilities rather than a capital outlay for acquiring an enduring advantage in the capital field.

Conclusion: The betterment contribution was not capital expenditure; it was revenue expenditure allowable in computing the assessee's business income.

Final Conclusion: The reference was answered against the Revenue and the deduction was held admissible.

Ratio Decidendi: A compulsory betterment levy imposed because development of an area has incidentally enhanced the value of the assessee's property is revenue expenditure where it does not acquire any asset or enlarge the profit-making structure, but merely facilitates the conduct of business.

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