Revenue expenditure on road improvement was deductible where no asset or capital right was acquired and business efficiency was enhanced.

An outlay made to improve a government-owned approach road, where the assessee acquired no asset, ownership, or capital right, was treated as revenue expenditure because it was incurred to remove transport difficulties and facilitate the efficient carrying on of business. The fact that the expenditure produced an incidental or enduring advantage did not by itself make it capital in nature, particularly when the work was a business necessity and no capital asset was brought into the assessee's hands. The amount was therefore allowable as a deduction as expenditure laid out wholly and exclusively for the purposes of the business under section 10(2)(xv) of the Indian Income-tax Act, 1922.

---

---

Issues: Whether the sum of Rs. 39,770 paid by the assessee to improve a government-owned approach road was capital expenditure or revenue expenditure and, if revenue, whether it was allowable as a deduction under section 10(2)(xv) of the Indian Income-tax Act, 1922.

Analysis: The payment did not bring into existence any asset of the assessee or secure ownership or any capital right in the road. The road belonged to the Government, and the assessee had only a right of way over it. The expenditure was incurred to remove transportation difficulties and to facilitate the efficient carrying on of the assessee's business. The mere fact that the road improvement produced an advantage does not by itself make the outlay capital in nature, particularly where the advantage is only incidental to the conduct of the business and no capital asset is acquired by the assessee. The test of enduring benefit is not conclusive where the expenditure is made as a business necessity to enable the business to be carried on conveniently and efficiently.

Conclusion: The sum of Rs. 39,770 was revenue expenditure incurred wholly and exclusively for the purposes of the assessee's business and was allowable as a deduction under section 10(2)(xv) of the Indian Income-tax Act, 1922.

Ratio Decidendi: An outlay made to facilitate the efficient carrying on of business, without acquiring any asset or capital right in the assessee, is revenue expenditure even if it incidentally yields an advantage of some permanence.

---