Capital expenditure and deduction tests apply to showroom equipment, club charges, depreciation, and asset-acquisition write-offs.

Movable showroom equipment installed at dealers' premises was treated as capital expenditure where ownership remained with the assessee and the assets could be removed and reused elsewhere. Club membership and related service charges were not allowed as revenue expenditure on the facts, because the claim was not limited to a pure membership subscription. Depreciation on the let-out portion of the Gurgaon building was also disallowed by following the assessee's own earlier case. Advances written off for proposed acquisition of capital assets were not deductible as bad debt or revenue expenditure, as the statutory conditions for such deduction were not satisfied.

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Issues: (i) whether expenditure incurred on purchase and installation of showroom equipment at dealers' premises was capital expenditure or revenue expenditure; (ii) whether club membership and service charges were allowable as revenue expenditure; (iii) whether depreciation claimed on the let-out portion of the Gurgaon building was liable to disallowance; and (iv) whether advances written off relating to proposed acquisition of capital assets were allowable as bad debt or revenue expenditure.

Issue (i): whether expenditure incurred on purchase and installation of showroom equipment at dealers' premises was capital expenditure or revenue expenditure.

Analysis: The equipment purchased for use in the dealers' showrooms was movable in nature and remained capable of being removed and reused elsewhere. The finding on record was that ownership continued with the assessee and was not transferred to the dealers. The claim that the outlay was merely for refurbishing the showroom and therefore revenue in nature was unsupported on facts. The Tribunal's view that the expenditure resulted in capital assets of the assessee was upheld.

Conclusion: The expenditure was rightly treated as capital expenditure, and the assessee was not entitled to claim it as revenue expenditure.

Issue (ii): whether club membership and service charges were allowable as revenue expenditure.

Analysis: The distinction between membership fees and charges for availing facilities or services was applied. On the facts found, the claim was not confined to membership fee alone, and the expenditure did not qualify for the benefit that may be available for pure membership subscription. The finding of fact recorded by the Tribunal was accepted.

Conclusion: The disallowance was sustained and the issue was decided against the assessee.

Issue (iii): whether depreciation claimed on the let-out portion of the Gurgaon building was liable to disallowance.

Analysis: The Tribunal followed its earlier decision in the assessee's own case on an identical controversy and maintained consistency in treatment of the claim. No legal infirmity was shown in the adoption of the earlier view. The challenge did not disclose any substantial question warranting interference under the appellate provision invoked.

Conclusion: The disallowance was upheld and the issue was decided against the assessee.

Issue (iv): whether advances written off relating to proposed acquisition of capital assets were allowable as bad debt or revenue expenditure.

Analysis: The write-off related to advances given for acquisition of capital assets and did not satisfy the statutory requirements governing deduction of bad debts or revenue loss. The principles applicable to bad debt claims were not met, and the amount represented a capital loss outside the claimed deduction provision. The Tribunal's reasoning was found consistent with the governing legal test.

Conclusion: The write-off was not allowable as bad debt or revenue expenditure, and the issue was decided against the assessee.

Final Conclusion: The assessee failed on all substantial questions of law, and the assessment-side disallowances were maintained in full.

Ratio Decidendi: Where the assessee retains ownership of movable equipment installed at third-party premises, the expenditure is capital in nature; and amounts written off relating to acquisition of capital assets are not deductible as bad debt or revenue expenditure unless the statutory conditions for deduction are satisfied.

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