There is a distinction between a sum paid as the purchase price of trading stock and a sum paid for the right to do something to obtain trading stock, such as excavating land. A sum of the former type is a trade expense for tax purposes, but sums of the latter type have been held not to be deductible.
The process of distinguishing between these two kinds of expenditure began with the Golden Horse Shoe1 case. The company paid a sum for the right to enter land so that material from 'tailing' dumps (waste remaining after gold is extracted) on the land could be removed. It was held that the cost of removing the tailings was a deductible
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