Leasehold acquisition expenses are revenue expenditure where they secure business premises without creating an enduring capital asset.

Expenditure incurred to secure leasehold premises for business branches, including lawyers' fees, brokerage and legal charges, was revenue expenditure because it did not bring into existence an asset or enduring capital advantage. The length of the lease, even if five or ten years, was not controlling; the decisive factor was the character and purpose of the payment. As the expenses were incurred to obtain premises for carrying on business and not to acquire a capital asset, they were allowable as a deduction. The reference was answered in favour of the assessee.

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Issues: Whether the expenditure incurred for obtaining leasehold premises and opening new branches was revenue expenditure allowable as a deduction, or capital expenditure on account of an enduring benefit.

Analysis: The expenditure consisted of lawyers' fees, brokerage, and legal expenses connected with securing premises on lease for business branches. The mere fact that the premises were taken on lease for a term of five or ten years did not, by itself, show that a capital asset or enduring advantage had been brought into existence. Applying the earlier decision on similar leasehold expenditure, the character of the expenditure and not the length of the lease was the controlling consideration. The payments were made to obtain premises for carrying on business and did not result in acquisition of an asset of an enduring nature.

Conclusion: The expenditure was revenue in nature and was rightly allowed as a deduction.

Final Conclusion: The reference was answered in favour of the assessee on both amounts, with no order as to costs.

Ratio Decidendi: Expenditure incurred to obtain business premises on lease, including brokerage and legal charges, is allowable as revenue expenditure if it does not bring into existence an asset or advantage of an enduring capital nature.

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