The taxpayer, which provided management services to its two subsidiaries which, in turn, ran a cellular phone system and sold cellular telephones, agreed with an American cellular telephone company ("Millicom") to pay an annual fee equal to 10% of its consolidated pre-tax profits for 15 years in consideration for the supply to the taxpayer from time to time at its request with future know-how.
The Court reversed a finding of the Commissioners (which had been affirmed in the Court below) that a lump-sum payment made by the taxpayer for the cancellation of this agreement was not deductible because it was not wholly and exclusively expended for the purposes of its trade. Millett L.J. noted that if Millicom had not agreed to cancel the fee agreement, there would have been no basis on which the taxpayer could properly have required the subsidiaries to reimburse it for making available to then know-how which they had not asked for and did not need. Because the liability in question was a liability of the taxpayer alone, the cancellation of that liability was made exclusively to serve the purposes of its trade.