Revenue expenditure test turns on business facilitation, not enduring benefit, where no asset is created or profit structure enlarged.

A payment made long after the construction of a dam and road, with no legal obligation or demonstrated business nexus, was treated as a voluntary act of good citizenship and not as expenditure laid out wholly and exclusively for business; it was therefore non-deductible. By contrast, a contribution under a sugarcane development scheme for roads around a factory was treated as revenue expenditure because it facilitated transport of cane and sugar, did not create any asset or enlarge the profit-making structure, and merely improved business operations, even though the benefit was enduring. The ratio is that enduring benefit is not decisive where the expenditure is incurred for operational efficiency rather than capital advantage.

---

---

Issues: (i) Whether the contribution of Rs. 22,332 towards the Deoni Dam and Deoni-Dam-Majhala Road was deductible as expenditure laid out wholly and exclusively for the assessee's business. (ii) Whether the contribution of Rs. 50,000 under the Sugarcane Development Scheme for construction of roads around the factory was deductible as revenue expenditure.

Issue (i): Whether the contribution of Rs. 22,332 towards the Deoni Dam and Deoni-Dam-Majhala Road was deductible as expenditure laid out wholly and exclusively for the assessee's business.

Analysis: The amount was contributed long after the dam and road had been constructed. There was no material showing any connection between the payment and the assessee's business, no legal obligation to make it, and no advantage to the business from the construction. The payment was made as an act of good citizenship and not for business purposes.

Conclusion: The amount of Rs. 22,332 was not deductible and the disallowance was justified, against the assessee.

Issue (ii): Whether the contribution of Rs. 50,000 under the Sugarcane Development Scheme for construction of roads around the factory was deductible as revenue expenditure.

Analysis: The roads were constructed around the factory to facilitate transport of sugarcane to the factory and movement of sugar out of it. The assessee acquired no asset, tangible or intangible, and no addition was made to its profit-making apparatus. Although the advantage was of long duration, it was only a facilitation of business operations and not an advantage in the capital field. The enduring benefit test was not conclusive because the expenditure was incurred to make the business run more efficiently and profitably.

Conclusion: The amount of Rs. 50,000 was revenue expenditure and was deductible under section 10(2)(xv), in favour of the assessee.

Final Conclusion: The claim succeeded only in respect of the Rs. 50,000 contribution, while the Rs. 22,332 contribution remained disallowed; the appeal was therefore allowed only to that limited extent.

Ratio Decidendi: Expenditure incurred for facilitating business operations, without acquiring any asset or adding to the profit-making structure, may be revenue expenditure even if the benefit endures for a long period; a payment made without business connection remains non-deductible.

---