THE ENDURING BENEFIT TEST IN DETERMINING CAPITAL AND REVENUE EXPENDITURE: A COMPREHENSIVE ANALYSIS OF JUDICIAL TRENDS AND EVOLVING TAX JURISPRUDENCE IN INDIA
AUTHOR – SHUBHAM SANKHALA, STUDENT AT CHRIST (DEEMED TO BE UNIVERSITY), PUNE LAVASA
BEST CITATION – SHUBHAM SANKHALA, THE ENDURING BENEFIT TEST IN DETERMINING CAPITAL AND REVENUE EXPENDITURE: A COMPREHENSIVE ANALYSIS OF JUDICIAL TRENDS AND EVOLVING TAX JURISPRUDENCE IN INDIA, INDIAN JOURNAL OF LEGAL REVIEW (IJLR), 5 (1) OF 2025, PG. 217-231, APIS – 3920 – 0001 & ISSN – 2583-2344.
The classification of expenditures as capital or revenue has been a longstanding area of contention in Indian tax jurisprudence, with significant implications for taxpayers and the exchequer alike. The enduring benefit test, a critical judicial principle, serves as a benchmark for determining the nature of such expenditures. This paper undertakes a comprehensive analysis of the evolution, application, and challenges of the enduring benefit test in India. It explores the historical development of the test, landmark rulings such as Empire Jute Co. Ltd. v. CIT and Madras Industrial Investment Corporation Ltd. v. CIT, and examines the subjective interpretations that have often led to inconsistencies in judicial decisions.
Further, the research provides a comparative perspective by evaluating the application of the enduring benefit test in global jurisdictions such as the UK and the USA, highlighting the influence of foreign precedents on Indian tax law. The paper critically examines the limitations of the test, particularly its adaptability to contemporary business practices, including expenditures on intangible assets, technology, and intellectual property.
Through an analysis of recent judicial trends, the study identifies a gradual shift toward a more holistic and pragmatic approach, incorporating considerations of commercial expediency and industry-specific nuances. The research also delves into the practical implications of the enduring benefit test on tax planning and compliance strategies, offering actionable insights for mitigating litigation risks.
Finally, the paper proposes recommendations for codifying clearer guidelines to bridge ambiguities in the classification of expenditures, ensuring predictability and fairness in tax administration. This study aims to contribute to the discourse on evolving tax jurisprudence in India and its alignment with global practices while addressing the challenges posed by a rapidly transforming economic landscape.
KEYWORDS: Capital, Direct, Expenditure, Revenue, Tax.