Business commencement through essential marketing activity supports revenue deduction, while partially unverified expenses may still be disallowed.

A business may be treated as commenced when its essential marketing activity begins, even if no actual purchases or sales have yet occurred. On that basis, expenditure incurred for the tephguard agency activity was allowable as revenue expenditure because the assessee had already entered the agency arrangement, issued advertisements, and started booking orders in advance. A limited disallowance was also sustained where part of the clearing charges had been incurred on behalf of the principal and the remaining expenses were not fully verifiable. The Tribunal therefore sustained allowance of the commenced business expenditure while maintaining the partial disallowance.

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Issues: (i) Whether the tephguard agency business had commenced during the relevant previous year so that the related expenditure was allowable as revenue expenditure. (ii) Whether the disallowance of Rs. 10,000 out of the claimed expenditure was justified.

Issue (i): Whether the tephguard agency business had commenced during the relevant previous year so that the related expenditure was allowable as revenue expenditure.

Analysis: The assessee was already carrying on an existing business and had taken up the tephguard agency as an additional marketing activity. The agency arrangement had been accepted, advertisements were issued, and orders had to be booked in advance for sale of the product. The absence of actual purchases or sales during the year did not prevent the business from being treated as commenced, because the essential business activity of marketing had already begun.

Conclusion: The business had commenced, and the expenditure relating to that activity was allowable as revenue expenditure.

Issue (ii): Whether the disallowance of Rs. 10,000 out of the claimed expenditure was justified.

Analysis: The assessee accepted that part of the clearing charges had been incurred on behalf of the principal and recovered later, and the remaining expenses were not fully verifiable. In these circumstances, the partial disallowance was considered reasonable.

Conclusion: The disallowance of Rs. 10,000 was upheld.

Final Conclusion: The revenue's challenge to allowance of the business expenditure failed, while the assessee's challenge to the partial disallowance also failed; the Tribunal sustained the allowance of the commenced business expenditure but maintained the limited disallowance.

Ratio Decidendi: A business may be regarded as commenced when its essential marketing activity starts, even if no actual purchase or sale has yet taken place, and expenditure incurred for that commenced activity is allowable as revenue expenditure.

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