The main legal point established in the judgment is that payments made to terminate a trading relationship and to secure payment of a trading debt owed to the company are deductible as expenses wholly and exclusively laid out or expended for the purposes of the company's trade.

JUDGMENT

Sir Wilfrid Greene, M.R. - This appeal from a decision of Lawrence, J., arises out of a claim by G. Scammell & Nephew, Ltd., to deduct for the purposes of ascertaining their taxable profits for the year 1933-34 three sums which they allege were expenses wholly and exclusively laid out or expended for the purposes of their trade. The sum in question are firstly, a sum of Pound 7,500 paid by the Company to one of their directors, Mr. Hood Barrs; secondly, a sum of Pounds 62 10s. 0d., being a contribution paid by them to a Mr. Toms towards his costs of certain litigation and thirdly a sum of Pound 53 10sh. 0d. representing costs incurred by them in connection with a compromise agreement.

The circumstances giving rise to that claim for deduction are of a rather complicated nature; they are set out in the case but I must give a short summary of them in order to make this judgment intelligible. The Company (to whom I will refer as Scammells) carry on business as motor engineers and at the relevant time when the story begins they had as directors, Mr. Hood Barrs, a Mr. England and a Mr. Scott; Mr. Hood Barrs held by far the larger part of the issued share capital of Scammells. In February, 1932, Mr. Hood Barrs Acquired a considerable share holding in a company called Blue Belle Motors Ltd., whose business appears to have been that of running motor coaches. That purchase put him into a position to control Blue Belle Motors de facto, and the first thing that seems to have happened is that Mr. Hood Barrs, Mr. England and Mr. Scoot became directors and remained a substantial shareholder in Blue Belle Motors, was treated by the new board as though he had ceased to be a director and office which he had previously held. It appears from the Minutes which are annexed to the case, and indeed one would have expected it, that one of the object of Mr. Hood Barrs in acquiring that share holding was to benefit Scammells by procuring for them a potential customer and after the board of Blue Bell Motors and been re-constituted, a number of transactions took place between the two companies. For one thing a management agreement was entered into under which Scammells were appointed managers and Secretary of Blue Belle Motors at a remuneration of Pounds 3,000 a year. That agreement, I think, was terminable by six months notice on either side. In addition to that, Scammells did a great deal of work, repair work and so fourth, and rendered other services to Blue Belle Motors. It would also appear though this is very largely inference because there is no finding of fact with regard to it, that Scammells gave certain financial assistance to Blue Belle Motors. However that may be, in April of 1932 there was owing to Scammells from Blue Belle Motors a sum of Pounds 12,779 13s. 10d. on trading account. That is found by the Commissioners in paragraph 5 of the Case, and that is a finding to the effect that that was a trade debt owing, which had become due in the courses of trading between the two companies from the one to the other. By way of security for that indebtedness Blue Belle Motors issued debentures to Scammells to the amount of Pounds 12,000. There is one other matter with regard to which certain material appears on the face of the documents annexed to the Case, and that related to certain motor coaches which Blue Belle Motors were apparently acquiring under hire-purchase agreements. It appears that there was some financial assistance in connection with that, and that some contract was entered into. It looks as though the intention at one time was that Scammells should acquire those coaches and let them to Blue Belle Motors, and there was a reference to a hiring agreement in relation to those coaches. But we are not in a position to know exactly what had happened with regard to those coaches because it was not matter that was gone into before the Commissioners and there is no finding about them. Accordingly we cannot, I think pay any attention to