Capital expenditure on overdraft facility treated as non-deductible because it secured an enduring business advantage.

Expenditure incurred to secure a general overdraft arrangement with a bank was treated as capital expenditure, because it conferred a substantial and enduring business advantage in the form of a continuing credit facility within a sanctioned limit. The arrangement was not regarded as a temporary loan or casual banking accommodation, and the assessee failed to show otherwise. Applying the capital-versus-revenue distinction, the payments were held to be made once and for all to obtain an advantage forming part of the capital structure, and were therefore not allowable as a deduction under section 10(2)(xv) of the Income-tax Act, 1922.

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Issues: Whether expenditure incurred for securing overdraft facilities from a bank was capital expenditure or revenue expenditure and therefore allowable under section 10(2)(xv) of the Income-tax Act, 1922.

Analysis: The expenditure was incurred not for obtaining a particular temporary loan but for securing a general overdraft arrangement under which the assessee could borrow at any time within the sanctioned limit. The facility was treated as conferring a substantial advantage and a general credit right of enduring character, and the assessee did not place material to show that the arrangement was merely a short-term or casual banking accommodation. Applying the established distinction between capital and revenue outlay, the payments were regarded as made once and for all to secure a business advantage forming part of the capital structure.

Conclusion: The expenditure was capital in nature and was not allowable as a deduction under section 10(2)(xv) of the Income-tax Act, 1922.

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