Business set-up date determines deduction timing; expenses after set-up but before commencement can qualify as business expenditure.

Business is treated as set up when it is established and ready to commence, even if actual trading has not begun. For deductions under Section 10(2), the relevant period is the previous year in which the business is carried on, and under Section 2(11) that year begins when the business is set up. Expenditure incurred after set-up but before actual commencement is therefore within the allowable period. The text notes that the Tribunal relied on the certificate of commencement, purchase of the mill, surrounding circumstances, and expense details before fixing 1 September 1946 as the set-up date.

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Issues: Whether there was evidence before the Tribunal to hold that the assessee company set up its business as from 1st September, 1946, so that expenses incurred after the setting up of the business and before actual commencement were allowable as business deductions.

Analysis: For the purpose of deductions under Section 10(2) of the Income-tax Act, the business must be carried on during the relevant previous year, and under Section 2(11) the previous year of a business begins when the business is set up. The expressions "setting up" and "commenced" are distinct: a business is set up when it is established and ready to commence, even if actual trading has not yet started. Expenditure incurred after the business is set up but before it actually commences falls within the allowable period. On the facts, the Tribunal had not relied only on the first purchase of raw material, but had considered the certificate of commencement, purchase of the mill, and the surrounding circumstances and expense details before fixing 1st September, 1946, as the relevant date.

Conclusion: There was evidence to support the Tribunal's finding that the business was set up from 1st September, 1946, and the reference was answered in favour of the Revenue.

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