Revenue expenditure for apprentice training remained deductible because it secured business services, not a capital asset.

Payment made under a business arrangement for training apprentices and maintaining trained personnel was held to be revenue expenditure, because it facilitated the efficient conduct of the business and improved profit-earning capacity without creating any capital asset or enduring advantage. The recipient's use of the funds to construct a hostel did not change the character of the outgoing in the assessee's hands, since the payment was made for training services rather than for acquisition of property or a capital benefit. The expenditure was therefore deductible in computing business profits.

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Issues: Whether the amount paid to the manufacturer for training the assessee's apprentices was capital expenditure or revenue expenditure deductible in computing business profits.

Analysis: The payment was made pursuant to the assessee's business arrangement for sale of the manufacturer's vehicles and was linked to the training of apprentices and maintenance of trained personnel required for carrying on the business. The fact that the recipient used the money to construct a hostel did not alter the character of the outgoing in the assessee's hands, because the payment was made for training services and not for acquisition of any asset or advantage of an enduring nature. Expenditure incurred to facilitate efficient conduct of business and improve profit-earning capacity, without creating a capital asset, is revenue expenditure.

Conclusion: The payment was revenue expenditure and was allowable as a deduction; the question was answered in the negative, in favour of the assessee.

Ratio Decidendi: An expenditure incurred for obtaining training or other business services necessary for carrying on the business, and which does not bring into existence an asset or enduring advantage, is revenue expenditure deductible as business expenditure.

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