Revenue expenditure treatment for brick-kiln land rights sustained where rights were limited and linked to raw material access.

Expenditure incurred to acquire Khatedari rights and leasehold use of land for brick-kiln operations was treated as revenue expenditure, because the land was obtained only for limited use over a ten-year period and then had to be surrendered to the State Government. The payment secured access to earth used as raw material in the brick-manufacturing business, rather than creating an asset of permanent or enduring character. On that basis, the cost was allowable to the extent claimed and the disallowance was not justified.

---

---

Issues: Whether the expenditure incurred for purchasing Khatedari rights and obtaining leasehold use of land for brick-kiln operations was capital expenditure giving rise to an enduring benefit, or revenue expenditure deductible as cost of raw material.

Analysis: The land was acquired only for limited use in brick-kiln business for a ten-year period, after which it had to be surrendered to the State Government. The expenditure was incurred to secure access to earth for manufacture of bricks, which was treated as the business's raw material. The limited duration of the rights and the commercial object of obtaining material for production showed that no asset of permanent or enduring character was acquired.

Conclusion: The expenditure was revenue in nature and allowable to the extent claimed; the disallowance was not justified.

---