Capital expenditure on permanent improvement of leased premises was not deductible as business income.

Expenditure incurred for permanent improvement of a cinema hall, even by a lessee, was treated as capital in nature because it enhanced the asset itself and had an enduring character. The amount was therefore not allowable as a deduction in computing business income. The claim for depreciation was outside the referred question and was not examined.

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Issues: Whether the expenditure of Rs. 16,499 incurred for improvement of the cinema hall was revenue expenditure deductible in computing business income, or capital expenditure not allowable as a deduction.

Analysis: The expenditure was incurred on improvement of the cinema hall and was of an enduring and permanent character. Such improvement enhanced the asset itself. Even if the assessee's status was that of a lessee, expenditure made for permanent improvement of the premises was held to be capital in nature. The claim for depreciation was not part of the referred question and could not be examined in this reference.

Conclusion: The expenditure of Rs. 16,499 was capital in nature and was not admissible as a deduction.

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