Business-use damages as revenue expenditure were deductible in the year liability accrued and was paid.

Damages paid for unauthorised occupation of business land were treated as revenue expenditure because the payment was connected with the use of property in business, did not create any capital asset, and was not personal in nature; the deduction was therefore allowable. The liability was also held to arise in the relevant accounting year because the assessee followed the calendar year, the amount was paid during that year under the demand then enforced, and later quantification did not defer accrual. The payment was thus admissible as a business deduction in the year in which it accrued and was discharged.

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Issues: (i) whether damages paid for unauthorised occupation of business land were allowable as business expenditure; (ii) whether the liability to make the payment arose in the relevant accounting year.

Issue (i): whether damages paid for unauthorised occupation of business land were allowable as business expenditure.

Analysis: The payment was made for the use of land employed in the business and did not result in acquisition of any capital asset or involve personal expenditure. The Court distinguished cases where payments were penal in nature for infraction of law and treated the amount here as payment connected with business use of the property.

Conclusion: The expenditure was allowable as a business deduction and was in favour of the assessee.

Issue (ii): whether the liability to make the payment arose in the relevant accounting year.

Analysis: The assessee followed the calendar year as the accounting year and the amount was actually paid during that year pursuant to the demand then enforced, even though the final quantification of liability occurred later.

Conclusion: The liability arose in the relevant year and the deduction was admissible in that year.

Final Conclusion: The payment was held to be an allowable business expenditure incurred in the relevant accounting year, so the Revenue's challenge failed.

Ratio Decidendi: A payment made for the use of business premises is deductible as revenue expenditure when it is not capital or personal in nature, and the liability is allowable in the year in which it accrues and is discharged in accordance with the accounting method regularly followed.

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