ARVIND MILLS LTD. vs C.I.T. AHMEDABAD

The Supreme Court held that under Section 37 of the Income Tax Act, 1961, the determination of whether an expenditure is capital or revenue hinges on its nature rather than the voluntary or involuntary nature of the payment. The Court found that betterment charges paid by the assessee under the Bombay Town Planning Act, 1954, were capital in nature as they contributed to the enhancement of land value and did not qualify as deductible revenue expenditure. Consequently, the appeal was dismissed, affirming the lower courts' decisions that disallowed the deduction of betterment charges.