Capital expenditure on competitor restraint was disallowed as revenue deduction because it secured an enduring business advantage.

A payment made under a tripartite agreement to restrain a competitor from manufacturing and selling specified glass products for five years was treated as capital expenditure. The court applied the distinction between revenue outlay for day-to-day trading and expenditure that secures an enduring business advantage. Because the arrangement removed a competitor from the field for a defined period and strengthened the assessee's profit-earning structure in a market affected by excess capacity and rivalry, the advantage was held to be in the capital field. The expenditure was therefore not allowable as a revenue deduction.

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Issues: Whether the sum paid to a competitor under a tripartite agreement, made to restrain it from manufacturing and selling certain glass products for five years, was capital expenditure or allowable revenue expenditure.

Analysis: The payment was made to secure a five-year restriction on competition in a market where excess capacity and rivalry threatened the assessee's business. The arrangement was not a mere operational adjustment or recurring trading expense. It was intended to eliminate a competitor from the field for a defined period, thereby stabilising the assessee's business and improving its profit-earning structure. Applying the settled distinction between outlay for carrying on business and outlay for acquiring an advantage in the capital field, the court held that the advantage obtained was of an enduring nature and went beyond the cost of day-to-day trading operations.

Conclusion: The expenditure was capital in nature and was not allowable as a revenue deduction.

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