M. K. BROTHERS (P) LTD. vs C.I.T. KANPUR

The Supreme Court held that the determination of whether an expenditure is capital or revenue depends on the purpose of the payment rather than its size or payment method. The Court ruled that payments made to discharge liabilities in the course of business operations are considered revenue expenditures, while those aimed at acquiring capital assets are capital expenditures. The appeal was dismissed, affirming the lower courts' decisions that the amount retained by the corporation was capital expenditure under the Income-tax Act, 1922, and thus not deductible.