Leasehold acquisition payment held capital in nature, as it secured the business right needed to carry on film exhibition.

Payment made for assignment of a leasehold right needed to run a cinema business was capital expenditure, because its object and effect were to acquire the very foundation of the business and secure an enduring business advantage. The fact that the consideration was payable in instalments, or that the lease had only a limited unexpired term, did not change its capital character. On that basis, the amount was not deductible as business expenditure under section 10(2)(xv) of the Income-tax Act, 1922.

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Issues: Whether the sum paid for assignment of the leasehold interest in the cinema theatre, or any part thereof, was deductible as business expenditure under section 10(2)(xv) of the Income-tax Act, 1922.

Analysis: The amount was paid to acquire the leasehold right in the theatre, which was the very foundation for carrying on the business of exhibiting films. The payment was described in the transfer deed as consideration for assignment of the assignor's interest and was not part of the recurring rent payable to the owners. Applying the settled tests distinguishing capital from revenue expenditure, the decisive consideration was the object and effect of the outlay: it brought into existence an advantage enabling the assessee to commence and carry on the business and was therefore attributable to capital. The fact that the consideration was payable in instalments or that the lease had a limited unexpired term did not alter its character.

Conclusion: The payment was capital expenditure and no deduction was allowable to the assessee under section 10(2)(xv) of the Income-tax Act, 1922.

Ratio Decidendi: A lump sum or instalment payment made for acquisition of a leasehold right necessary to carry on business is capital expenditure if it secures an asset or advantage for the business, even though the lease is for a limited period and the payment is spread over time.

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