Revenue expenditure test applies where tree planting in an industrial estate only improves ambience, not capital assets.

Expenditure on planting trees in an industrial estate was treated as revenue expenditure because it did not bring into existence an income-yielding asset or any advantage in the capital field. The improvement was confined to the atmosphere and appearance of the estate, and the enduring benefit test was held not to be conclusive; the commercial nature of the advantage was decisive. The disallowance was therefore deleted.

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Issues: Whether the expenditure incurred on planting trees in avenues in the industrial estate was capital expenditure or allowable revenue expenditure.

Analysis: The expenditure did not bring into existence any income-yielding asset. Planting trees merely improved the atmosphere and appearance of the industrial estate and did not result in an advantage in the capital field. The test of enduring benefit was held not to be conclusive, and the commercial nature of the advantage was decisive.

Conclusion: The expenditure was held to be allowable as revenue expenditure and the disallowance was deleted.

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