13.

Softwood Pulp & Paper

Ltd v FCT 95 ATC 4459
(text p241)
 Fact:The TP was incorporated for
the purpose of establishing a new
paper production in South America.
It was
estimated that the total cost of the
project would be $14m to $15m if it
were to proceeds. However,
following
research into the feasibility of the
mill, the Canadian promoters
withdrew from the project. The
TP claimed
deductions for certain Expenses.
 Conclusion: The expense is not
deductible
 TP has never passed a preliminary
investigation stage as the TP had
“not committed itself” of decided to
go
Softwood Pulp & Paper Ltd v FCT 95 ATC 4459

Fact: The TP was incorporated for the purpose of establishing a new paper production in South
America. It was estimated that the total cost of the project would be $14m to $15m if it were to
proceeds. However, following research into the feasibility of the mill, the Canadian promoters
withdrew from the project. The TP claimed deductions for certain Expenses.

Conclusion: The expense is not deductible

TP has never passed a preliminary investigation stage as the TP had “not committed itself” of
decided to go ahead “the any definitive sense”.

Everything done was making a decision

The expenses incurred to establish, expand or diversifying a business they could be incurred too
early and/or capital because they are related to the profit yielding structure of the business and
therefore not deductible

VALLAMBROSA RUBBER CO., LTD., v FARMER 

Facts: TP was a rubber company. Rubber trees take 7 years to yield. Issue:
whether could deduct expenses incurred for planning and weeding etc. before the trees
began producing any income.

Outcome: TP could deduct because expenses were regular expenses of a

revenue nature. Example of a case where court allows deduction for expenses that look
forward.