Temporary cessation of business does not defeat deduction where expenses are incurred to preserve and revive the same business.

Expenditure incurred to prospect and maintain an abandoned mica business after a cyclone remained deductible where the company was still using its existing staff to assess whether production could be resumed. Temporary stoppage of operations did not, by itself, break business continuity or convert the outlay into capital expenditure. The decisive factor was that the spending was made in the course of carrying on efforts to preserve or revive the same business. On those facts, the expenditure was treated as business expenditure and not as a capital loss, with the issue resolved in favour of the assessee.

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Issues: Whether expenditure incurred by an assessee to prospect and maintain an abandoned mica business after a cyclone, with the intention of resuming production, was allowable as a deduction when the business was not ultimately resumed.

Analysis: The expenditure was incurred after production had been stopped by a cyclone, but the company continued prospecting through its existing staff to ascertain whether the mica business could be carried on again. The absence of actual resumption before the end of the year did not, by itself, convert the outlay into capital expenditure or show that the business had ceased for the purposes of deduction. What mattered was whether the expenditure was incurred in the course of carrying on the business on the facts of the case, and the temporary inactivity did not break that continuity.

Conclusion: The expenditure was held to be allowable as a deduction and was not treated as a capital loss; the issue was decided in favour of the assessee.

Final Conclusion: Expenditure incurred to preserve and test the viability of an existing business during a temporary interruption may qualify as business expenditure even if the business is not ultimately restarted.

Ratio Decidendi: Temporary cessation of operations does not terminate a business for tax deduction purposes where the expenditure is incurred in the course of efforts to carry on or revive the same business.

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