COMMISSIONER OF INCOME-TAX, KERALA, ERNAKULAM vs TRAVANCORE SUGAR & CHEMICALS LTD.

The Supreme Court held that the payment of Rs. 42,480 to the Travancore Government under the agreements was a revenue expenditure and not capital in nature, thus allowable under Section 10(2)(xv) of the Indian Income-Tax Act, 1922. The Court reversed the Kerala High Court's ruling that classified the payment as capital expenditure. It emphasized that the nature of the expenditure as revenue was crucial, and the conditions imposed by the Government were necessary for the company's operation and profit generation.