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The application of the statutory phrase 'wholly and exclusively for the purposes of the trade'¹ involves an inquiry into three related, and at times indistinguishable, questions:

1. Ìý

   •ÌýÌýÌýÌý Is the expenditure incurred for the purposes of the trade?

2. Ìý

   •ÌýÌýÌýÌý Is it wholly so incurred?

3. Ìý

   •ÌýÌýÌýÌý Is the trade purpose the exclusive purpose?

Consideration of these questions has to a great extent concentrated on the final point of exclusivity, if only because there is normally some trade purpose behind the incurring of expenditure which is sought to be deducted and the question is then whether that purpose was tainted by other considerations. However, an early case in which the question arose as to whether the expenditure was itself 'for the purposes of the trade' was Strong & Co Ltd². There, the taxpayer company carried on a trade as innkeeper and sought to deduct an amount of damages paid to a guest who was injured when a chimney on premises owned by the company