JUDGMENT judgment of court was delivered by R. Sudhakar J.-Aggrieved by order passed by Tribunal in allowing appeal filed by assessee, appellant-Revenue is before this court by filing present appeal. This court, vide order dated July 4, 2007, admitted appeal on following substantial question of law: "Whether, on facts and in circumstances of case, Tribunal was right in holding that loss in non-performance of contract and expenditure on increase in forward cover for foreign exchange, incurred in respect of new joint venture, which did not materialise, is revenue expenditure?" point in issue here is whether loss arising in course of new line of business activity is to be allowed as revenue expenditure or as capital expenditure? facts, in nut-shell, are as follows: case is relatable to assessment year 1996-97. respondentassessee is company, which is engaged in business of marketing of bulk drugs and formulations. In order to improve their business activity, they undertook market study of drugs and identifying potential customers so that business activity of marketing bulk drugs and formulations could be enhanced. In this regard, during relevant financial year, assessee company identified bulk drug Ebuprofen as one of promising bulk drugs for purpose of marketing through their company. assessee procured trial order for execution through M/s. Karnataka Malladi Biotics Ltd. (for short "KMBL"), Bangalore. There was agreement between assessee and KMBL, whereby marketing of Ebuprofen was to be done by assessee-company and it has to be paid commission out of profits accruing to KMBL on export of this product in following manner: "25 per cent. of profits out of this product transaction would be to share of KMBL and remaining 75 per cent. to assessee." Further, agreement also made it clear that any loss in transaction would be borne by assessee-company. Due to misfortune and unfavourable market conditions, product could not be manufactured and sold during period in question and, therefore, orders came to be extended and in order to cover possible exchange fluctuations, assessee obtained forward cover through State Bank of Mysore, however, in name of KMBL, which is requirement as per Reserve Bank of India guidelines. It further appears that RBI, thereafter, barred companies from roll-over of forward cover and, therefore, it resulted in loss to assesseerespondent in view of foreign exchange fluctuations. This transaction resulted in loss to assessee- company to tune of Rs. 40,63,503, which was paid over to bank. It is also on record that bank, viz., State Bank of Mysore, debited to assessee's account prior to March 31, 1996, consequent to settlement of foreign exchange cover, which is subject matter of loss sustained by assessee. According to assessee, loss had occurred during previous year relevant to assessment year 1996-97 and, therefore, it is business loss. Department as well as Commissioner of Income-tax (Appeals) took different view in matter stating that it is new enterprise on part of assessee and, therefore, loss is capital in nature and not loss that occurred in course of business. Aggrieved against orders of Assessing Officer and Commissioner of Income-tax (Appeals), assessee preferred appeal before Tribunal. Tribunal, taking note of above stated undisputed fact, came to conclusion that loss, as incurred by assessee, is in course of its business activity and activity in question is part and parcel of same activity of marketing bulk drugs. There was no new enterprise, as held by Assessing Officer and Commissioner of Income-tax (Appeals) but activity is same one assessee was already carrying on. For better clarity, relevant portion of order of Tribunal is extracted hereinbelow: "The learned counsel was able to explain before us that assessee is already in same line of business and company has identified Ebuprofen one of promising bulk drugs and, accordingly, company had procured order for trial execution only as extension of its business through KMBL, Bangalore, and not as new business. It is settled law that when loss incurred in business activity it is to be allowed. assessee was able to explain before us that loss was incurred only during year and agreement with KMBL also together with RBI permission supports contention of assessee that loss is business loss and it is not new line of business then one assessee was already carrying on. However, learned Departmental representative defended orders of authorities below. Since assessee was able to establish before us claim that expenditure in question was incurred wholly and exclusively for its business, we set aside orders of authorities below and direct Assessing Officer to allow claim of assessee as business loss for assessment year 1996-97." Aggrieved by said order of Tribunal, appellant-Revenue is before this court by filing present appeal. Heard learned standing counsel appearing for appellant-Revenue and learned counsel appearing for respondent-assessee and also perused materials available on record. moot question before this court is whether activity of assessee would be new enterprise for purpose of treating loss as capital expenditure. Similar issue arose before Gujarat High Court in case of CIT v. Suhrid Geigy Ltd. [1996] 220 ITR 153 (Guj) wherein Gujarat High Court considering decision of Supreme Court in Alembic Chemical Works Co. Ltd. v. CIT [1989] 177 ITR 377 (SC) held as follows (page 162): "In Alembic Chemical Works Co. Ltd. v. CIT [1989] 177 ITR 377 (SC) assessee-company was engaged in manufacture of antibiotics and pharmaceuticals. It was granted licence for manufacture of penicillin. Until 1963, it has already made substantial investment of over Rs. 66 lakhs for setting up plant, etc., for production of penicillin. Initially, appellant was able to achieve only moderate yields. With view to increasing yield, appellant negotiated with Meiji, reputed Japanese enterprise whereunder in consideration of once for all payment of 50,000 US $, it agreed to supply assessee pilot plant, technical information, knowhow and written description of Meiji's process for fermentation of penicillin with flow sheet of process in pilot plant and to arrange for training of appellant's representatives in various plants in Japan at assessee's expense and advise assessee in large scale manufacture for period of two years. assessee was to get technical know-how confidentially and secretly and not to seek any patent for process. assessee's claim for deduction of sum paid to Japanese company as revenue expenditure was disallowed by Department holding that expenses were capital in nature, for purpose of setting up new plant and new process and for complete replacement of equipment inasmuch as new process and new type of plant was to be put up in place of old process and old plant. High Court also rejected assessee's claim. Reversing decision of High Court, Supreme Court observed that there was no material before Tribunal to come to finding that appellant had obtained under agreement completely new plant with completely new process and completely new technical know-how. business of appellant was to manufacture penicillin. Even after agreement, product continued to be penicillin. There was no material before Tribunal that area of improvisation was not part of existing business. There was no material to hold that it amounted to new or fresh venture. What was stipulated was improvement in operations of existing business and its efficiency and profitability not removed from area of day-to- day business of appellant's established enterprise. financial outlay under agreement for better conduct and improvement of existing business was revenue in nature and was allowable deduction in computing business profits of appellant. In coming to this conclusion, court also noticed principles which should govern while deciding such issues by courts. most important aspects relevant for present purpose which can be culled out from above discussion is that where expenses are incurred in areas which supplement existing business and is not fresh or new venture and agreement of acquiring technical know-how pertain to product already in line of established business which was intended to improve operations of existing business, its efficiency and profitability from area of day-to-day business of appellant's established enterprise's expenses be treated as revenue and not capital. On other hand, if technical know-how is acquired for purpose of establishing altogether new or fresh venture, launching of new enterprise, same expenditure may be treated as capital and not revenue. In such cases test of enduring benefit might break down. That is to say, argument that knowledge having become once part of knowledge bank of acquirer, cannot be taken back in sense and will always remain with assessee and is enduring. But looking to business realities, namely, purpose for which knowledge has been acquired becomes determining true character of expenditure." From decision, as extracted above, it is clear that main parameters that are necessary for expense to be treated as revenue expenditure is where expenses are incurred in areas which supplement existing business and is not fresh or new venture and agreement relates to revenue and said activity is for purposes of improving operations of existing business, its efficiency and profitability from area of day-to-day business of appellant's established enterprise's, expenses be treated as revenue and not capital. In case on hand, careful reading of order of Tribunal and facts as narrated above, it is clear that there is absolutely no justification for Department to hold that there was new line of business on which there occurred loss. parameters enunciated in decision in Suhrid Geigy Ltd.'s case (supra) is squarely attracted to facts of present case, justifying loss of assessee as business loss, as admittedly, assessee is in business of marketing bulk drugs, formulations, etc., and one of its ventures has ended in loss and that loss is attributable to business and it cannot be deemed to be new enterprise and capital expenditure. For all reasons stated above loss incurred by assesseerespondent is on account of business and, therefore, this court is of considered opinion that order passed by Tribunal requires no interference. Accordingly, substantial question of law is answered in favour of assessee-respondent and against appellant-Revenue. In result, finding no merits warranting interference with order passed by Tribunal, appeal is dismissed. However, in circumstances of case, there shall be no order as to costs. *** Commissioner of Income-tax v. Saka Marketing Services P. Ltd