Revenue expenditure principle: municipal amenity costs deductible where no capital asset is created and business only gains operational advantage.

Expenditure incurred to lay water pipelines and provide municipal amenities under the agreement was revenue in nature because no capital asset came into existence for the assessee; the pipelines and accessories belonged to the municipality. The only commercial advantage obtained was immunity from municipal rates, taxes and charges for fifteen years, which merely facilitated business operations in the revenue field without adding to the capital structure. Applying that principle, the expenditure was allowable as a deduction as revenue expenditure under Section 10(2)(xv).

---

---

Issues: Whether the expenditure incurred by the assessee for laying water pipelines and providing municipal amenities under the agreement was capital expenditure or revenue expenditure allowable as a deduction under Section 10(2)(xv) of the Indian Income-tax Act, 1922.

Analysis: The expenditure did not bring into existence any capital asset for the assessee, because the pipelines, installations and accessories belonged to the municipality under the agreement. The only commercial advantage obtained by the assessee was immunity from municipal rates, taxes and charges for fifteen years. Applying the principle that the enduring benefit test is not conclusive where the advantage lies in the revenue field and merely facilitates business operations without adding to the assessee's capital structure, the expenditure was held to be on revenue account.

Conclusion: The expenditure was revenue expenditure and was allowable as a deduction; the assessee succeeded and the appeal failed.

Ratio Decidendi: Expenditure incurred to secure a business advantage in the revenue field, without creating a capital asset for the assessee or altering its capital structure, is deductible as revenue expenditure even if the advantage endures for a period of years.

---