Capital expenditure on litigation to protect a leasehold monopoly is not deductible as business revenue cost.

Litigation costs incurred to defend a leasehold monopoly and preserve quarrying rights were treated as capital expenditure because they protected an enduring business asset, not a recurring trading outlay. Applying the distinction between once-and-for-all payments and revenue expenditure, the legal expenses were characterised as a non-recurring cost incurred to retain the source of business profits. The fact that the expenditure was connected with the carrying on of business did not make it deductible, since expenditure directed to preserving a capital asset remains capital in nature. Accordingly, no deduction was allowable under the relevant allowance provision.

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Issues: Whether litigation incurred in defending a leasehold monopoly to protect quarrying rights was deductible as expenditure incurred solely for the purpose of earning profits or gains, or whether it was capital expenditure.

Analysis: The allowance provision permitted deduction only of expenditure not being in the nature of capital expenditure and incurred solely for earning profits or gains. The legal expenses were incurred to defend the company's leasehold monopoly and thereby preserve the source of its business, which was a capital asset. Applying the accepted criterion that capital expenditure is ordinarily a once and for all outlay, whereas revenue expenditure is recurrent, the expenditure was treated as a non-recurring payment made to retain a capital asset. The cited brewery decision was distinguished because the legal costs there were not shown to be capital in nature.

Conclusion: The expenditure was capital expenditure and was not deductible.

Final Conclusion: Litigation expenses incurred to protect the company's enduring leasehold monopoly were held to be capital in nature, so no deduction was allowable under the relevant allowance provision.

Ratio Decidendi: Expenditure incurred to preserve or defend an enduring capital asset is capital expenditure and is not deductible as revenue expenditure merely because it is connected with the carrying on of business.

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