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Travelling and Entertainment Expenses

8.205. Reference has been made in Chapter 7 to the interpretation given to the general deduction section (section 51) of the Act. It is there recommended that an apportioned amount of an outgoing should be denied deduction where it can be inferred from all the circumstances that the character of the outgoing is in part a payment for a purpose which is not the gaining of income. It is not intended, however, that merely because an outgoing such as travelling and entertainment expenses might be said to be extravagant, some part of it must be denied deduction. The proposition asserted in the authorities that the law does not enable the Commissioner to say how much a taxpayer should spend in the gaining of income will continue to be valid. The Committee would not favour provisions, of the kind included in the Canadian law, which would give the Commissioner power to disallow a deduction if he considers that the expenditure involved is unreasonable.

8.206. It may nonetheless be appropriate for the law to specify particular items of expenditure which are likely to involve substantial elements University private consumption by the proprietors of a business and deny them deduction. Recent amendments to the Act deny, for example, deductions of some expenditure on yachts and expenditure on club subscriptions.

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