AIR 1953 HYDERABAD 244

Hyderabad High Court

Hon'ble Judge(s): Mohd. Ahmed Ansari, Jagan Mohan Reddy , JJ

Income-Tax Act (11 of 1922) , S.10(2)(xv)— Capital expenditure - Test. Excess Profits Tax Act (15 of 1940) , Sch.I, R.1— Hyderabad Excess Profits Tax Act (1355 F) , Sch.I, R.1(1)(x)— Generally speaking from a commercial or accountancy point of view the term "capital" connotes an asset which is utilised for earning profits. Accordingly all expenditure which results in the acquisition of a permanent asset or assets with a view to its being used in the business for earning revenue is capital expenditure and any amount expended for increasing that asset or for adding to it in order to increase the capacity of the asset to earn more profits or reducing the cost of production is treated as capital expenditure.(Para 5) Similarly all establishment and other expenses such as those incurred by way of repairs, replacements, renewals of existing assets which do not in any way add to their earning capacity but simply serve to maintain the original equipment in an efficient working order and generally all such expenses which are incurred in the conduct and administration of the business are properly chargeable to revenue expenditure.(Para 5) The approach to the question whether an expenditure is of a capital nature depends on whether an advantage or right of an enduring nature has been accrued wh....