Law: Income Tax Act, 1961

Section: 37

(a) Income-tax----Capital or revenue expenditure---General principles---Test of enduring benefit is not always conclusive---Lease---Premium on lease---Finding that premium was actually advance rent---Premium allowable as revenue expenditure---Indian Income Tax Act, 1961, S. 37. It would be misleading to suppose that, in all cases, securing a benefit for the business would be, prima facie, capital expenditure "so long as the benefit is not so transitory as to have no endurance at all". There may be cases where expenditure, even if incurred for obtaining advantage of enduring benefit, may, nonetheless; be on revenue account and the test of enduring benefit may break down. It is not every advantage of enduring nature acquired by an assessee that brings the case within the principle laid down in this test. What is material to be considered is the nature of the advantage in a commercial sense and it is only where the advantage is in the capital field that the expenditure would be disallowable on an application of this test. If the advantage consists merely in facilitating the assessees trading operations or enabling the management and conduct of the assessees business to be carried on more efficiently or more profitably while leaving the fixed capital untouched, the expenditure would be on revenue account, even though the advantage may endure for an indefinite future. The test of enduring benefit is, therefore, not a certain or conclusive test and it cannot be applied blindly and mechanically without regard to the, particular facts and circumstances of a given case. (b) Income-tax--- ----Depreciation---Extra shift depreciation allowance---Extra shift depreciation allowance available on capitalized technical documentation fees---Indian Income Tax Act, 1961, S. 32. The assessee had entered into a lease agreement with M.I.D.C. on November 24, 1980, granting lease of a plot of land. Under the terms of the agreement, the assessee was required to construct a building thereon within a period of two years. Thereafter, the assessee was entitled to use and occupy the property with the building thereon for a period of 95 years upon payment of rent of Re.1 per annum. After the…

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