Case C71

Judges:
FE Dubout Ch
G Thompson M
N Dempsey M

Court:
No. 3 Board of Review

Judgment date: 29 October 1971.

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F.E. Dubout (Chairman): Gordon Thompson and N. Dempsey (Members): This reference involves a claim by the taxpayer of his one-half share of travelling expenses incurred by the partnership of which he is a member in inspecting various properties with a view to purchase for letting purposes. The taxpayer over a period of several months inspected many likely properties and also surveyed the possibilities of obtaining finance in respect of the purchase of a suitable property.

2. The partnership did subsequently conclude the purchase of a property from which it derived rental income.

3. The representative of the taxpayer, whilst recognising the general principle that expenditure incurred for the purpose of gaining an asset or an advantage of an enduring nature, is of a capital nature, submitted that there were special circumstances here which took the case out of the general principle. He pointed to the facts that taxpayer was engaged over a period of time in seeking both finance and a suitable property, and that the money was not expended solely in relation to the purchase of a particular property. He submitted that it was analogous to the allowance of outgoings for postage stamps and telephone calls by investors.

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ATC 316

4. The Board has considered the submissions on behalf of the taxpayer, and on the evidence, has come to the conclusion that the special circumstances submitted by the taxpayer's representative do not afford sufficient reason to depart from general principle. The Board is accordingly of opinion that the travelling expenses were incurred for the purpose of acquiring a capital asset, and are thus of a capital nature.

5. The general principle referred to has been laid down by the highest authority on several occasions in the past. See
Vallambrosa Rubber Co. Ltd. v. Farmer (1910) 5 T.C. 529;
Atherton v. British Insulated and Helsby Cables Limited (1925) 10 T.C. 155; and by the High Court in
Sun Newspapers Ltd. and Associated Newspapers v. F.C. of T. (1938) 61 C.L.R. 337. There are many Board of Review decisions to the same effect. The Board does not consider it necessary here to analyse all these cases, but reference sufficient for present purposes may be made to
15 C.T.B.R. Case 29 (O.S.) 239 at 244 where the Board was unanimously of opinion that travelling expenses involved in the inspection of properties prior to purchase were of a capital nature.

6. The Board is therefore of opinion that the taxpayer's claim is excluded from deductibility by sec. 51(1) of the Act in that it is of a capital nature. The taxpayer's objection is accordingly disallowed.

Claim disallowed