326 SECRETARIAL PRACTICE 
of trade debts, are frequently challenged, and where they are 
actually incurred for the purpose of acquiring assets they are 
not allowed. The expense of issuing debentures is not 
allowable [Texas Land and Mortgage Co. v. Holtham (1894), 
10, T.L.R. 337], and a bonus payable on a repayment of 
borrowed money is also not allowed [Arizona Copper Co. v. 
Smiles (1891), 29 Sc. L.R. 134]. Legal expenses incurred 
in defence of existing rights are admitted. 
5. Losses on Closing Factories and removal expenses are 
not allowable according to High Court decisions, but as a 
matter of practice, where removal expenses are compulsory, 
no objection is usually raised to the cost of removal. In 
any case the expenses of removing trading stock are allowed. 
6. Bad Debts in respect of cash advances which have not 
been made for trade purposes, are not allowed. It is obvious 
that the question of what are ‘trade purposes’ must be 
decided in each case. 
v7. Exhaustion of Nitrate Grounds. The exhaustion of 
natural assets like nitrate deposits. mineral seams and so on, 
is not recognised. 
8. Foreign taxation is allowable as a deduction. In view, 
however, of the provisions for allowance of relief in respect of 
Dominion Income Tax, such taxes must be added back wholly 
or in part according as the law of the Dominion provides for 
reciprocal relief, see Finance Act, 1920, s. 27 (4). 
9. Sums allocated to reserve funds generally are not allowed, 
whatever the object may be, for they are considered simply 
as an appropriation of profits. Generally speaking, the 
contingency provided against will be allowed as and when 
it arises if it comes within the provisions of the Acts. For 
example, amounts set to a bad debt reserve would not be 
allowed, but the actual sums charged to that account during 
the year would be allowed instead. There is a provision 
for allowing an estimate for specific doubtful debts, but in 
practice this is frequently not claimed. In the long run 
it makes no difference, as debts are fully allowed to the 
extent to which they become bad. 
Relief in 10. Relief from United Kingdom income tax can be claimed 
Respens of in respect of Dominion income tax. This relief was first 
Income Tax. granted under the provisions of s. 43 of the Finance Act, 1916. 
The whole position was, however, reviewed by the Royal 
Commission on the Income Tax; and, following a recom- 
mendation in the Commission’s Report, the Finance Act of 
1920 [s. 27] made new and more complete provisions.