Capital expenditure on advertising asset held not deductible as revenue outlay for business promotion.

A film purchased for use as a model in advertising and customer attraction was treated as a capital asset rather than stock-in-trade or an ordinary advertisement expense. Because the film was acquired to be employed in future publicity for the assessee's colour-processing business, the cost was held to be capital in nature and not a recurring revenue outlay. The expenditure was therefore not allowable as a deduction on revenue account, and the issue was decided against the assessee.

---

---

Issues: Whether the purchase cost of a film acquired for use as a model in advertising and attracting customers was deductible as revenue expenditure or was capital expenditure.

Analysis: The film was not acquired for exhibition as stock-in-trade or for dealing in films, but as an asset to be used in future publicity for the assessee's colour-processing business. Expenditure incurred to acquire an asset that is thereafter employed for advertising is distinct from ordinary recurring advertisement outlay. Since the film was purchased as a capital asset to be used as a means of promotion, the outlay was not in the nature of revenue expenditure.

Conclusion: The expenditure was capital in nature and was not allowable as a deduction as revenue expenditure; the answer was against the assessee.

---