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No deduction is available in respect of expenditure which represents the application of the profits earned¹. Such expenditure is not incurred for the purposes of the trade but for the purpose of enabling the profits of the trade to be distributed or applied for a particular purpose. No deduction may be claimed, therefore, by a company in respect of its dividends or other distributions. In Thomson (Archibald), Black & Co Ltd² the company incurred expenditure in applying to the court to have its capital reduced, so enabling it to pay a dividend. Although the expenditure was held to have been quite properly incurred and the company's action to have been in its own interest, the expenditure was incurred to enable it to distribute its profits more advantageously and accordingly was not a proper deduction in arriving at the balance of the profits available for distribution. The costs were incurred for a purpose other than trading.

In Hutchinson & Co (Publishers) Ltd³ a company published a number