Business expenditure on jockey training school treated as revenue outlay, not capital, because it protected trading operations.

Expenditure incurred in running a school to train Indian boys as jockeys was treated as having a direct business purpose because it protected the assessee's racing business against an anticipated shortage of jockeys. Commercial expediency can justify outlay that indirectly preserves trading opportunities or removes an operational risk, and the fact that the benefit is not confined to the accounting year does not by itself make it capital. The recurring annual running cost was said not to create a capital asset or a certain enduring advantage, since the trained boys were under no obligation to serve the assessee. The text nevertheless states that the assessee was not entitled to the deduction claimed.

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Issues: Whether the expenditure incurred in running a school for training Indian boys as jockeys was laid out wholly and exclusively for the purposes of the assessee's business and was allowable as a revenue deduction under section 10(2)(xv), or was capital expenditure incurred to secure an enduring benefit.

Analysis: The expenditure was incurred to protect and maintain the assessee's racing business against an apprehended shortage of jockeys, and therefore had a direct business purpose even though it did not relate to earnings of the accounting year. Expenditure made to avert a threat to the business, remove an operational embarrassment, or preserve trading opportunities may be incurred for the purposes of the business. The fact that the benefit was indirect did not disqualify it, since commercial expediency may justify expenditure that indirectly facilitates the carrying on of business. The expenditure was also recurring annual running expense, not a sum laid out once and for all to acquire a capital asset or enduring advantage. The trained boys were under no obligation to serve the assessee, so no capital asset or certain enduring benefit came into existence.

Conclusion: The expenditure was revenue expenditure laid out for the purposes of the business and was not capital expenditure; the assessee was not entitled to the deduction claimed.

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