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The Delhi High Court in the case of Dalmia Dairy Industries Ltd. v. CIT (107TAX544) held that despite the fact that attempts have been made time and again by the Supreme Court and High Courts to evolve various principles to distinguish a capital expenditure from revenue expenditure but it has not been possible to lay down any exhaustive test to determine the question. In referring to the provisions of section 37 the Court held that though the scope and albeit the expression ‘ for the purpose of business’ is very wide and may include expenditure of diverse nature but howsoever wide the meaning of the expression ‘for the purpose of the business’ may be, its limits are implicit in it. Only that expenditure is allowable under section 37 which is intimately and directly connected with the actual running of the assesses normal business activity. In this case the assessee made a claim for deduction of litigation expenses incurred by it to realise its claim for sale of its two factories. The Court held such expenditure as capital in nature.

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