Capital vs Revenue expenditure

This query is : Resolved

Bhavana (Querist)
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30 December 2019 An assessee is into the business of running a fuel filling station having dealership agreement with a PSU supplying petrol & diesel. As per the dealership agreement with such PSU, the assessee had paid reconstitution fees of Rs. 5.25 lakhs to the PSU on admission of new partners into the firm and treated the same as Revenue expenditure. However, during the scrutiny assessment proceedings, the Order u/s 143(3) of IT Act was passed by disallowing the same and treating it as Capital expenditure. Should it be treated as Revenue or Capital expenditure ? Kindly answer with supporting case laws or section references as per Income Tax Act, 1961.