Revenue expenditure for restoring an existing colliery to working condition was allowable as a business deduction.

Expenditure on renovating buildings, reconditioning machinery and clearing debris at an existing colliery to restart mining operations was treated as revenue expenditure, because the business was already in existence and continued to be carried on. No new asset, new construction, new machinery or business expansion was brought into existence. The work merely restored the colliery for resumption of operations, so it was incurred to facilitate the existing trading activity rather than to secure an enduring advantage. On that basis, the expenditure was allowable as a business deduction.

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Issues: Whether the expenditure incurred for renovating buildings, reconditioning machinery and clearing debris at an existing colliery for restarting mining operations was capital expenditure or revenue expenditure.

Analysis: The expenditure was incurred in respect of an existing business that continued to be carried on by the assessee, though one colliery remained closed for a long period. The facts showed no acquisition of any new asset, no new construction, no new machinery and no expansion of the business. The work done amounted to renovation, reconditioning and removal of accumulated debris so that the existing colliery could resume operations. Applying the settled business test, expenditure made to carry on and facilitate an existing trading operation, without bringing into existence an asset or advantage of an enduring character, is revenue in nature.

Conclusion: The expenditure was revenue expenditure and allowable as a business deduction.

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