Revenue v Capital: deduction for business commencement expenses affirmed; canvassing and registration costs treated as deductible under the Act.

Whether expenses incurred in connection with commencing specific kuri operations are revenue or capital: the analysis applies the Revenue v Capital distinction and treats commission for canvassing, stationery, advertisement, registration, travelling, stamp paper, postage and printing as revenue expenditures incurred in the ordinary course of carrying on an authorised banking business; by analogy to expenses for opening a branch or registering a trade-mark, these costs are deductible under the provision allowing deductions for business commencement-related expenses, while distinguishing non-deductible debenture-raising costs. Outcome: such kuri commencement expenses are deductible.

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Issues: Whether, on the facts and in the circumstances of the case, the amounts expended in connection with the kuries for the assessment years 1957-58, 1958-59 and 1959-60 are admissible deductions under the Income-tax Act.

Analysis: The assessee is a banking company authorised by its memorandum and articles to carry on kuri business and carried on such business in the years in question. The expenditures in dispute consist of commission for canvassing, stationery, advertisement, registration, travelling expenses, stamp paper, postage and printing incurred in connection with commencing specific kuries. These expenditures were held not to be capital in nature. The Court examined precedents including Hindustan Commercial Bank Ltd., In re and Commissioner of Income-tax v. Finlay Mills Ltd., which treated similar expenses (opening a branch; registration of a trade-mark) as revenue expenditures allowable under Section 10(2)(xv) of the Income-tax Act, 1961, and distinguished authorities concerning debenture-raising expenses which were held not deductible.

Conclusion: The question is answered in the affirmative and in favour of the assessee; the expenditures in connection with the kuries are deductible under Section 10(2)(xv) of the Income-tax Act, 1961.

Ratio Decidendi: Expenditures incurred in the ordinary course for commencing or opening parts of an existing business (including canvassing, advertisement and registration expenses) are revenue in nature and deductible under Section 10(2)(xv) of the Income-tax Act, 1961.

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