Tenancy rights payment to settle eviction suit treated as revenue expenditure and allowed as a business deduction.

Payment made by an existing tenant to compromise an eviction suit was treated as revenue expenditure because it was incurred to defend and preserve existing tenancy rights, not to acquire a new asset or enduring advantage. The amount was directed to maintaining the assessee's existing capital asset in the form of tenancy rights, so it was allowable as a deduction in computing business income.

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Issues: Whether the sum of Rs. 10,000 paid by the assessee to compromise an eviction suit for the premises used in its business was deductible as revenue expenditure in computing business income.

Analysis: The assessee was an existing tenant and the expenditure was incurred to defend and preserve its tenancy rights. No new asset or enduring advantage was acquired by the payment. The expenditure was directed to maintaining an existing capital asset in the form of tenancy rights, rather than bringing into existence a fresh asset.

Conclusion: The sum of Rs. 10,000 was revenue expenditure and was allowable as a deduction in computing the assessee's business income.

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