Business expenditure requires proof of commencement and exclusive business purpose before deduction under income-tax law.

Expenditure is deductible only where the assessee shows that a business had commenced or was being carried on and produces supporting material linking the outlay to that business. On the facts recorded, no evidence showed commencement of operations during the relevant year, so the claimed expenses were treated as relating to work in progress and not as deductible revenue expenditure. Chartered flight and travelling s were also disallowed because the assessee failed to prove that they were incurred wholly and exclusively for business purposes under section 37(1), or to establish business necessity and nexus with the claimed activities.

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Issues: (i) Whether the assessee was entitled to deduction of expenses where no material showed commencement or carrying on of business activity during the relevant year and the expenses were treated as relatable to work in progress; (ii) Whether the expenditure on chartered flights and travelling expenses was allowable as business expenditure in the absence of proof that it was incurred wholly and exclusively for the purposes of business under section 37(1) of the Income-tax Act, 1961.

Issue (i): Whether the assessee was entitled to deduction of expenses where no material showed commencement or carrying on of business activity during the relevant year and the expenses were treated as relatable to work in progress.

Analysis: The record did not show that any business activity had commenced during the relevant year. The assessee also failed to produce evidence before the authorities to show actual project-related business operations. In those circumstances, the expenditure was treated as connected with the work in progress and not as deductible revenue outgo.

Conclusion: The disallowance of the expenses was upheld, against the assessee.

Issue (ii): Whether the expenditure on chartered flights and travelling expenses was allowable as business expenditure in the absence of proof that it was incurred wholly and exclusively for the purposes of business under section 37(1) of the Income-tax Act, 1961.

Analysis: The assessee failed to establish the business necessity and nexus of the chartered flight and travelling expenses with the alleged business purposes. The authorities found no satisfactory material to show that the expenditure was wholly and exclusively for business, and the assessee did not rebut those findings with supporting evidence.

Conclusion: The disallowance of the chartered flight and travelling expenses was upheld, against the assessee.

Final Conclusion: The Tribunal found no infirmity in the orders of the lower authorities and confirmed the disallowances made in both assessment years, resulting in dismissal of the assessee's appeals.

Ratio Decidendi: Expenditure is deductible only when the assessee proves, with supporting material, that it was incurred for an existing business and was wholly and exclusively for business purposes; failing such proof, the claim can be disallowed and treated as relating to work in progress or non-deductible expenditure.

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