Shaw v Federal Commissioner of Taxation [1920] HCA 13; (1920) 27 CLR 340 (10 March 1920)

HIGH COURT OF AUSTRALIA

Shaw and Another Appellants; and The Federal Commissioner of Taxation Respondent.

H C of A

10 March 1920

Knox C.J., Gavan Duffy and Starke JJ.

Shelton, for the appellants.

Pigott, for the respondent.

The judgment of the Court, which was delivered by Knox C.J., was as follows:—

Knox C.J.,

Gavan Duffy and Starke JJ.

We think that the first question ought to be answered Yes. We have no doubt that the whole of the proceeds of sale, having been realized in the financial year ending 30th June 1916, must be brought into account, and that such proceeds of sale were properly included in the assessment; in other words, the proceeds of the sale cannot be notionally spread over other years than that in which they were realized. As to the second question we think that it should be answered No. As to the third question we do not think that it should be answered at all.

That is our decision on the special case, but, as what I may call an extra-judicial opinion, we desire to say that in our opinion the Commissioner ought to consider whether it would not be consistent with the Act, as it certainly would be fair to the taxpayer, not to limit the expenses incurred in the production of the profits assessable under the Act to expenses actually incurred in the accounting period. I mean by "accounting period" the year in which the profits arise. We do not decide judicially that such an allowance should be made to the taxpayer, and we are far from deciding that it should not. The case does not raise that question, and we are not in a position to decide it. But we think, on the plain common sense of the case fortified by the authority of Usher's Wiltshire Brewery v. Bruce[1], referred to by our brother Starke, that the use of the word "profit" primâ facie involves a deduction of the expenses properly incurred in realizing the proceeds out of which the profit arises.

Questions answered: (1) Yes; (2) No. Question 3 not answered.

Solicitors for the appellants, Lynch, McDonald & Elliott, for Simmons, Wolfhagen, Simmons & Walsh, Hobart.

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

[1] (1915) A.C., 433.