Revenue expenditure for business operations was deductible because the agreement created no enduring asset or capital advantage.

On construction of the agreement, the payment did not secure transfer of information, processes or inventions, and did not bring into existence any asset or enduring advantage. The expenditure was incurred in the course of business for running operations and earning profits, so it was revenue expenditure rather than capital expenditure. It was therefore rightly allowed as a deduction under section 37(1) of the Income-tax Act, 1961.

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Issues: Whether the amount paid by the assessee under the agreement was allowable as a deduction under section 37(1) of the Income-tax Act, 1961, or was capital expenditure.

Analysis: On construction of the agreement, the payment did not secure any transfer of information, processes, or inventions so as to bring into existence any asset or advantage of an enduring nature. The arrangement was of a business character and the expenditure was incurred for running the business and earning profits.

Conclusion: The amount paid was revenue expenditure and was rightly allowed as a deduction under section 37(1) of the Income-tax Act, 1961.

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