Revenue expenditure treatment allowed for a car bought only to salvage usable spare parts for business use.

A vehicle purchased only for its usable spare parts was treated as revenue expenditure where the parts were removed for use in an existing car, and the registration and fitness certificate of the purchased vehicle were cancelled. On those facts, the vehicle had no continuing business value after dismantling and did not constitute a capital asset yielding an enduring advantage. The cost was therefore characterised as expenditure on parts consumed in the business rather than a depreciation claim on a capital asset, and the full purchase price was allowed as revenue expenditure.

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Issues: Whether the cost of a car purchased only for removing and using its spare parts in another vehicle was allowable as revenue expenditure instead of being treated as a depreciation claim on a capital asset.

Analysis: The assessee established that the vehicle was acquired only for its usable parts, that the parts were removed for use in the existing car, and that the registration and fitness certificate of the purchased vehicle were cancelled. On those facts, the vehicle, after dismantling, was found to have no continuing value in the business. The expenditure was therefore not regarded as the acquisition of a capital asset yielding an enduring advantage, but as the cost of parts consumed in the business.

Conclusion: The full purchase price was held allowable as revenue expenditure and the assessee succeeded on the issue.

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