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of <h1>Tribunal upholds assessee's claim on revenue expenditure for spare parts, deeming it integral to business</h1> <h3>Commissioner Of Income-Tax, Bombay Versus Ralliwolf Limited</h3> Commissioner Of Income-Tax, Bombay Versus Ralliwolf Limited - [1980] 121 ITR 262, 8 CTR 129 Issues Involved:1. Whether the Tribunal's decision regarding the assessee's claim of Rs. 1,31,356 as revenue expenditure is correct.2. Whether the Tribunal's finding that the assessee had set up its business during the previous year relevant to the assessment year 1960-61 was perverse or based on no evidence.Summary:Issue 1: Tribunal's Decision on Revenue Expenditure ClaimThe Tribunal held that the assessee had carried on business in spare parts, which was an integral part of its composite business. The Tribunal found that the assessee was carrying on business in spare parts as an integral activity associated with manufacture. Consequently, the Tribunal directed the ITO to allow the entire revenue expenditure after the procurement of raw materials, unless it included any capital expenditure, which would then be disallowed.Issue 2: Setting Up of BusinessThe Tribunal's finding that the assessee had set up its business during the relevant accounting period was challenged. The court examined whether this finding was perverse or based on no evidence. The court referred to the objects of the assessee-company, which included buying, selling, and dealing in portable electrical tools and other machinery. The court noted that the assessee had made significant purchases during the relevant period, which were shown as closing stock. The court cited the Gujarat High Court's observations in CIT v. Saurashtra Cement and Chemical Industries Ltd., emphasizing that business commences when an essential activity of the business starts, such as purchasing goods for sale.The court concluded that the Tribunal's finding was not perverse or based on no evidence. The purchases made by the assessee during the relevant period indicated that the business had commenced. Therefore, the Tribunal's decision was upheld.Conclusion:The question was answered in the negative, in favor of the assessee, and the revenue was directed to pay the costs of the assessee.
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