British Sugar Manufacturers, Ltd. v. Harris (1937), 21 TC 528 (C.A.)

A company, which was in financial difficulty, agreed to pay 20% of its net profits for a four-year period to creditors "in consideration of their giving to the Company the full benefit of their technical and financial knowledge and experience". In finding that deduction of these amounts was not precluded by a statutory prohibition against the deduction of payments made out of the profits or gains of a company, Sir Wilfrid Greene, M.R. stated (pp. 545-546):

"If a person purchases a share of profits, of course the profits paid to that person cannot be deducted ... . Now in the present case there is nothing approaching a purchase of a share of profits in that sense. It is not cash that passes in exchange for these profits; it is services, and the badge of such a contract is remuneration for services ..."

The taxpayer agreed to pay 20% of its net profits to other corporations in consideration for their provision of managerial services and advice on technical matters. In finding the payments by the taxpayer to be deductible as "money wholly and exclusively laid out or expended for the purposes of the trade", Sir Greene, M.R. noted that although where a person purchases a share of profits, a payment of profits to that person will not be deductible, here "it is not cash that passes in exchange for these profits; it is services, and the badge of such a contract is remuneration for services ..." (p. 546).

The taxpayer agreed to pay 20% of its net profits to other corporations in consideration for their provision of managerial services and advice on technical matters. In finding the payments by the taxpayer to be deductible as "money wholly and exclusively laid out or expended for the purposes of the trade", Sir Greene, M.R. noted that although where a person purchases a share of profits, a payment of profits to that person will not be deductible, here "it is not cash that passes in exchange for these profits; it is services, and the badge of such a contract is remuneration for services ..." (p. 546).

The taxpayer agreed to pay 20% of its net profits to other corporations in consideration for their provision of managerial services and advice on technical matters. In finding the payments by the taxpayer to be deductible as "money wholly and exclusively laid out or expended for the purposes of the trade", Sir Greene, M.R. noted that although where a person purchases a share of profits, a payment of profits to that person will not be deductible, here "it is not cash that passes in exchange for these profits; it is services, and the badge of such a contract is remuneration for services ..." (p. 546).