Business consultancy spend for administration rationalisation was allowed as deductible revenue expenditure, not capital outlay.

Consultancy expenditure incurred for preparing budget forms, budgetary control and standard cost evaluation was held to be deductible as business expenditure because it was spent to improve and rationalise the assessee's administration. The expression "for the purpose of business" was treated as wide enough to cover measures connected with rationalisation and modernisation of business administration. On the facts, the consultant's fee was regarded as wholly and exclusively laid out for the business, and the contention that it created a capital asset or enduring benefit was rejected. The amount was therefore allowed as a deduction in computing income.

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Issues: Whether the amount spent on consultancy for preparation of budget forms, budgetary control, and standard cost evaluation was deductible as business expenditure under section 10(2)(xv).

Analysis: The expenditure was incurred to improve and rationalise the assessee's administration. Expenditure incurred for the purpose of business is of wide scope and may include measures connected with rationalisation and modernisation of business administration. On the facts, the payment to the consultant was treated as wholly and exclusively for the purpose of the business. The suggestion that the consultancy resulted in acquisition of a capital asset or an enduring benefit was rejected.

Conclusion: The amount of Rs. 10,500 was deductible in computing the assessee's income and the issue was answered in favour of the assessee.

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