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Issues:
1. Interpretation of Section 10(2)(xv) of the Income-tax Act regarding deduction of business expenses. 2. Determining if expenses incurred during a period of inactivity can be considered as admissible deductions. 3. Assessing whether maintaining an office alone constitutes carrying on a business for the purpose of claiming deductions. Analysis: The case involved a registered firm acting as managing agents and sole selling agents of a sugar mill. The firm incurred expenses for maintaining a selling agency office at Kanpur during a period when no business was conducted. The main issue was whether these expenses could be claimed as deductions under Section 10(2)(xv) of the Income-tax Act against the assessee's other income. The court emphasized that for expenses to be deductible as business expenditure, they must be incurred wholly and exclusively for the purpose of a business that was in existence during the relevant accounting year. The court noted that even during periods of inactivity, a business could still be considered ongoing if the entity maintained its establishment, incurred expenses in anticipation of future work, and aimed for business success. However, if the business had ceased to exist or was discontinued, then the deduction of expenses would not be permissible. In this case, due to the restrictions imposed by the Sugar Control Order, the assessee was unable to conduct any selling agency business during the relevant period. Merely maintaining an office without engaging in business activities did not qualify as carrying on a business for the purpose of claiming deductions. As a result, the court held that since there was no business being conducted, the expenses incurred for maintaining the selling agency office were not deductible. Therefore, the court answered the question in the negative and ruled in favor of the Department, awarding costs to be paid by the assessee.
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