Revaluation fee treated as revenue expenditure where no new capital asset or enduring benefit arose.

Fee paid for revaluation of a company's assets was held to be revenue expenditure because it did not bring into existence any new capital asset or enduring benefit in the capital field. The upward revaluation merely reflected the existing assets in the books to present the financial position more favourably and support the carrying on of business. Applying the enduring benefit test, the court treated the outlay as connected with the efficient conduct of the business rather than with acquisition or extension of capital assets, and allowed deduction under section 10(2)(xv) of the Indian Income-tax Act, 1922.

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Issues: Whether the fee paid for revaluation of the assessee-company's assets was capital expenditure or revenue expenditure and, if revenue, deductible under section 10(2)(xv) of the Indian Income-tax Act, 1922.

Analysis: The governing test was whether the outlay brought into existence an asset or advantage of enduring benefit for the business. On the facts, no new capital asset was acquired and no enduring benefit in the capital field arose; only the existing assets were revalued upward in the books to present the financial position more favourably and facilitate the carrying on of business. The expenditure was thus connected with the efficient conduct of the business rather than with the acquisition or extension of capital assets.

Conclusion: The expenditure was revenue in nature and was deductible under section 10(2)(xv) of the Indian Income-tax Act, 1922; the question was answered in the affirmative and in favour of the assessee.

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