TMI Blog1989 (5) TMI 156X X X X Extracts X X X X X X X X Extracts X X X X ..... to that business could be allowed as revenue expenditure, even though there was no purchase or sale of tephguard oil during the relevant previous year. 3. The assessee was carrying on business of ship chandlers. It was represented before the Income-tax Officer that during the relevant previous year the assessee had started a new line for supply of tephguard oil. The expenses claimed were establishment, clearing charges, advertisement expenses etc. On the ground that there were no purchases and sales as per the statement of profit and loss account for the period 1-7-1980 to 31-3-1981, the Income-tax Officer treated the loss of Rs. 51,664 relating to the aforesaid business as capital loss. 4. In appeal before the Commissioner (Appeals), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. The Commissioner (Appeals) held that when the agency business had already been taken up and advertisements also had been given in newspapers, it could not be said that there was no business in that line carried on by the assessee and, therefore, there was no justification for disallowing the loss claimed by the assessee as capital loss. However, the Commissioner (Appeals) directed the Income-tax Officer to allow the business loss in tephguard agencies to the extent of Rs. 41,664 and confirmed the disallowance of Rs. 10,000 on the ground that the travelling expenses of Rs. 6,387 and also the establishment expenses were not verifiable and further it was not made clear as to how the assessee had to incur expenditure on clearing charges even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TR 240 (Kar.) (4) CIT v. Ralliwolf Ltd. [1980] 121 ITR 262 (Bom.). It was the case of the departmental representative that the various expenses incurred by the assessee were in the nature of preliminary expenses incurred before the setting up of the business and, therefore, the Commissioner (Appeals) erred in allowing the expenses as revenue expenses subject to disallowance of Rs. 10,000 for certain reasons. He reiterated that in a business of the aforesaid type, unless and until purchases were made, the business cannot be considered as having been started. 7. In reply, the learned representative of the assessee argued that the proposal for a suitable marketing arrangement with the assessee for the product " Tephguard-Engine Protectiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T v. Saurashtra Cement Chemical Industries Ltd. [1973] 91 ITR 170. In particular he referred to the observations of their Lordships in that decision occurring in the paragraph starting from page 175 and ending on page 176 of that Report and argued that all the activities which go to make up the business need not be started simultaneously in order that the business may commence and further that as soon as an activity which is an essential activity in the course of carrying on the business or which, in other words, is a business activity is started, the assessee must be held to have commenced the business. In the present case, tephguard oil was being introduced in India for the first time and therefore, the assessee had to give wide publici ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that no portion of the expenditure should be allowed because the business had not commenced, as regards the cross-objection, the departmental representative argued that the Commissioner (Appeals) was right in disallowing at least Rs. 10,000 out of the total expenses of Rs. 51,664 claimed by the assessee. 9. We have carefully considered the rival submissions. The assessee was already carrying on business as a ship chandler and he started the tephguard agency for marketing tephguard oil as the sole agent of M/s. Air Control Systems as an additional business. In view of the above, the assessee's case is distinguishable from cases involving manufacture, production and sale. As observed earlier, tephguard oil was being introduced for the first ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... having been commenced. Just because there was no actual purchase during the year due to certain difficulties experienced by M/s. Air Control Systems with the Customs Department for clearing the imported tephguard oil, it would not be correct to consider that the business had not commenced. Therefore, we uphold the order of the Commissioner (Appeals) that the assessee's business in tephguard agencies had already commenced as soon as the agency business was taken up and advertisements were given in newspapers and consequently the expenses incurred in respect of such business should be allowed as revenue expenditure. As our decision has been reached purely on the basis of the facts and circumstances obtained in this case, we do not consider it ..... X X X X Extracts X X X X X X X X Extracts X X X X
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