Revenue expenditure for export preparations was allowed where the business was already set up, despite no actual export sales.

Expenditure incurred to procure materials and prepare for export was treated as allowable revenue expenditure even though no actual purchase or export had taken place. The Tribunal found that the assessee had obtained export orders, made advances for granite supply and processing, secured a lease for excavation, and was registered as an exporter. On those facts, the business was held to have been set up during the relevant year, so the expenses were incurred in the course of setting up and conducting the business. The question was answered in favour of the assessee.

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Issues: Whether the expenditure incurred by the assessee in procuring materials and taking steps for export, though no actual purchase or export took place, was allowable as revenue expenditure in the assessment year concerned.

Analysis: The material on record showed that the assessee had obtained export orders, made advances for supply and processing of granite, secured a lease for excavation, and was registered as an exporter. On these facts, the Tribunal found that the business had been set up during the relevant year and that the expenditure was incurred in the course of setting up and conducting the business, notwithstanding the absence of actual export sales.

Conclusion: The expenditure was allowable as revenue expenditure and the question was answered in favour of the assessee.

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