Revenue expenditure on deferred share delivery was deductible because it preserved the existing profit-making contract and secured stock-in-trade.

Interest paid to share-brokers for deferred delivery of shares held as stock-in-trade was revenue expenditure deductible in computing business income. The payment was made to preserve an existing profit-making arrangement and secure the very stock-in-trade, not to acquire a source of supply or any capital asset of enduring character. Because the outlay was integrally connected with the carrying on of business and formed part of the profit-earning process, it was allowable as business expenditure.

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Issues: Whether interest payable to share-brokers for deferred delivery of shares, which formed the assessee's stock-in-trade, was allowable as revenue expenditure in computing business income.

Analysis: The arrangement secured the actual supply of shares acquired as stock-in-trade and was entered into to preserve the profit-making transaction when the assessee lacked funds for immediate payment. The expenditure was not incurred to acquire a source of supply or any asset of a permanent character, but to keep alive the existing contract and obtain the very stock-in-trade at an enhanced cost. On the facts found, the payment was integrally connected with the carrying on of the business and formed part of the profit-earning process.

Conclusion: The interest was allowable as revenue expenditure and the question was answered in the affirmative, in favour of the assessee.

Ratio Decidendi: Where an outlay is made to obtain the very stock-in-trade under an existing business contract, and not to acquire a source of supply or a capital asset of enduring character, the expenditure is revenue in nature and deductible as business expenditure.

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