Bohemians Club v Acting Federal Commissioner of Taxation [1918] HCA 16; (1918) 24 CLR 334 (21 March 1918)

HIGH COURT OF AUSTRALIA

The Bohemians Club Appellant; and The Acting Federal Commissioner of Taxation Respondent.

H C of A

21 March 1918

Griffith C.J., Barton, Powers and Rich JJ.

Mitchell K.C. and Mann, for the appellant.

Starke, for the respondent.

Griffith C.J. read the following judgment:—

March 21

Griffith C.J.

The appellants are a social club of the usual kind. Their funds are derived in great part from the annual subscriptions of the members, which in the year in question amounted to about £2,200. At the close of the year's operations there remained unexpended a sum of £96, which the Commissioner claims to treat as taxable income, on the ground that the Club, being an unincorporate association, falls within the definition of company and may be a taxpayer (sec. 3); that it is therefore to be regarded as a legal entity entirely distinct from its members, and that, therefore, all moneys received from its members are taxable income. Neither of these conclusions follows from the premiss. The argument is, indeed, founded upon a complete misconception of the nature of a club, which is a voluntary association of persons who agree to maintain for their common personal benefit, and not for profit, an establishment the expenses of which are to be defrayed by equal contributions of an amount estimated to be sufficient to defray those expenses, and the management of which is entrusted to a committee chosen by themselves. On principle, it is quite immaterial whether the contributors are two or two hundred. If there were two or three only, it would not occur to anyone to say that the two or three are collectively in receipt of income from the individuals. Nor are the committee of the club or the club itself. The contributions are, in substance, advances of capital for a common purpose, which are expected to be exhausted during the year for which they are paid. They are not income of the collective body of members any more than the calls paid by members of a company upon their shares are income of the company. If anything is left unexpended it is not income or profits, but savings, which the members may claim to have returned to them. The notion that such savings are taxable income is quite novel, and quite inadmissible.

The only arguments that have been set up against this view are that under the Income Tax Assessment Act all receipts or "incomings" are income, and that the club is a separate entity from its members. As to the latter argument I am of opinion that the interpretation clause has nothing to do with substantive rights. If the members of a club collectively have a taxable income, the club may be treated as a taxpayer, as in the Carlisle and Silloth Golf Club's Case[1]. And that is all. Whether it has such an income must be ascertained aliunde.

As to the first point, the term "income" is not defined in the Act, but sec. 10 speaks of taxable income "derived directly or indirectly ... from sources within Australia." A man is not the source of his own income, though in another sense his exertions may be so described. A man's income consists of moneys derived from sources outside of himself. Contributions made by a person for expenditure in his business or otherwise for his own benefit cannot be regarded as his income, unless the Legislature expressly so declares. This Act does not contain any such declaration either express or implied.

A somewhat similar argument addressed to this Court in the case of Mooney v. Commissioners of Taxation (N.S.W.)[2] was rejected both by it and by the Judicial Committee[3].

The Carlisle and Silloth Golf Club's Case[4] shows that the view above expressed as to the nature of club subscriptions is accepted in the United Kingdom. The case of the New York Life Insurance Co. v. Styles[5] is, in my opinion, not distinguishable in principle.

I think, therefore, that both questions must be answered in the negative.

Barton J.

I agree.

Powers J. (read by

Griffith C.J.).

I concur in the judgment delivered by the learned Chief Justice.

Rich J. read the following judgment:—

The question for our determination is whether the subscriptions of the members of the Bohemian Club are taxable income within the meaning of the Income Tax Assessment Act 1915-1916. I will assume that this Club is an unincorporated association within sec. 3 of the Act. That, however, leaves the question whether this body has an income which is taxable.

Counsel for the respondent argued that these subscriptions were income derived from personal exertion. Of whom can such exertion be predicated—the Club or its members? The answer is of no importance because "income from property ... means all income ... not derived from personal exertion," whether it is income from property or not. It is not easy to understand why "income from property" should have this wholly artificial meaning fixed upon it. We are thus brought to the question, what language in the Act imposes a burden on these subscriptions? I can find none. Such resources are not income. No doubt, the returns from sales of any commodities are income of the association on the assumption I have made, but it would require an established customary meaning in fiscal provisions to enable the word "income" to be stretched to cover such subscriptions as these. I know of no such extended meaning, and the Act creates none.

I therefore answer the questions submitted in the negative.

Questions answered in the negative. Costs to be costs of the appeal.

Solicitors for the appellant, Blake & Riggall.

Solicitor for the respondent, Gordon H. Castle, Crown Solicitor for the Commonwealth.

[1] (1913) 3 K.B., 75.

[2] [1905] HCA 61; 3 C.L.R., 221.

[3] (1907) A.C., 342, at p. 350; [1907] UKPCHCA 1; 4 C.L.R., 1439, at p. 1445.

[4] (1913) 3 K.B., 75.

[5] 14 App. Cas., 381.