Revenue expenditure treatment for shop alteration costs where internal walls were removed only to facilitate business use

Expenditure incurred on removing internal walls and converting a rented shop into a larger hall for wholesale business was treated as revenue expenditure because no new enduring asset was created and the work merely facilitated business operations. Since the floor and roof remained intact and only the middle walls were removed, the outlay was held to be outside the capital field and allowable as a business deduction under section 37.

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Issues: Whether the expenditure incurred on removal of internal walls and conversion of the rented shop into a hall for business use was capital expenditure or revenue expenditure, and whether it was allowable as a business deduction.

Analysis: The shop was situated on the ground floor of a three-storeyed building, and the floor and roof remained intact. Only the middle walls were removed to make a larger hall for carrying on the wholesale medicine business. On these facts, no new asset of an enduring nature was created and the work was undertaken only to facilitate business operations. The expenditure was therefore not in the capital field.

Conclusion: The expenditure was revenue expenditure and was allowable under section 37.

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