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Issues: Whether expenditure incurred for securing overdraft facilities from a bank was capital expenditure or revenue expenditure, and whether it was allowable as a deduction under section 10(2)(xv) of the Income-tax Act, 1922.
Analysis: The expenditure was incurred for obtaining financial accommodation for the business. The governing principle applied was that borrowing money is incidental to the carrying on of business and that the cost of securing the use of money for a limited period does not become a capital outlay merely because the borrowing is connected with business expansion or working capital needs. The absence of a lasting asset or enduring advantage, and the irrelevance of the purpose for which the loan is sought, supported treatment of the payment as revenue expenditure. The incomplete factual findings regarding the duration and terms of the overdraft did not prevent application of the settled principle.
Conclusion: The expenditure was held to be of revenue nature and allowable as a deduction under section 10(2)(xv) of the Income-tax Act, 1922, in favour of the assessee.
Ratio Decidendi: Expenditure incurred for obtaining borrowing facilities for business is revenue expenditure when it secures only the use of money for a limited period and does not create an asset or enduring advantage.
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