Business expenditure after commencement is revenue deductible under section 37(1); section 35D does not apply once operations have begun.

Expenditure incurred after the business was set up and in the course of activities to secure orders and generate future revenue was treated as revenue expenditure under section 37(1), because the absence of immediate income did not make it capital or pre-operative in nature. Section 35D was held inapplicable since it applies only to expenditure incurred before commencement of business. The expenditure was therefore allowable as business expenditure.

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Issues: Whether the assessee's expenditure was allowable as business revenue expenditure on the ground that its business had already commenced, and whether section 35D of the Income-tax Act, 1961 applied to require amortisation of such expenditure.

Analysis: The expenditure was incurred after the business had been set up and in the course of carrying on business activities aimed at securing orders and generating future revenue. The absence of immediate income in the relevant year did not make the expenditure capital or pre-operative in nature. Once the factual finding stood that the business had commenced, the expenditure was to be tested under section 37(1), and not under section 35D, which applies only to expenditure incurred before commencement of business.

Conclusion: The expenditure was allowable as business expenditure, and section 35D was not attracted.

Ratio Decidendi: Expenditure incurred after the business is set up, even if no revenue is earned in the year, is allowable as business expenditure if it is laid out for business purposes and is not capital in nature; section 35D does not apply where business has already commenced.

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