Thomson v Deputy Federal Commissioner of Taxation [1929] HCA 18; (1929) 43 CLR 360 (6 September 1929)

HIGH COURT OF AUSTRALIA

Thomson Appellant; and Deputy Federal Commissioner of Taxation Respondent.

H C of A

On appeal from the Supreme Court of Western Australia.

6 September 1929

Knox C.J., Gavan Duffy, Rich and Dixon JJ.

J. P. Dwyer and M. Crawcour, for the appellant.

J. L. Walker, for the respondent.

Counsel for the appellant

The Court delivered the following written judgment:—

Sept. 6

Knox C.J.,

Gavan Duffy, Rich and Dixon JJ.

This is an appeal from a judgment of Draper J. by which he dismissed an appeal to him of the appellant from an assessment by the Deputy Federal Commissioner of Taxation for income tax for the financial year 1926-1927 based upon income derived during the year ending 30th June 1926. By this assessment the appellant's income from property was assessed at £1,440. According to the assessment she had no income from personal exertion. The sum of £1,440 was part of an amount of £1,800 paid to the appellant and her husband during the year ending 30th June 1926 under an agreement made on 25th July 1925 between them and R. C. Connell Ltd. By this agreement the appellant and her husband agreed to sell, and the company agreed to buy, all timber not less than 4 feet 6 inches round the butt at a height of 3 feet from the ground growing upon two adjoining parcels of land, and they granted to the company liberty to enter with servants and workmen for the purpose of cutting and removing the timber so sold. The company agreed to pay as purchase-money for the "said timber and rights" the sum of £1,800. The parcels of land were Crown leases which had been taken up one by the appellant and one by her husband. The Commissioner attributed £1,440 of the £1,800 to the land of which she was lessee. She had taken up this land as far back as 1903. Neither she nor her husband took up the land with a view to growing or selling timber, and at first they had used it for grazing. It had, however, been eaten out by overstocking. There is therefore no question in this case of a business, trade, pursuit or avocation; and this the Commissioner in effect admits by treating the sum in question as income from property. Upon these facts we see no reason why the proceeds of the sale of the timber should be considered as income. The timber formed part of the asset which the appellant acquired when she took up the land. It is true that timber increases by growth, but that growth is not an increase in the value of the asset which may be detached and yet again recur annually or periodically. It would be contrary to facts to regard the land as a capital asset by which timber was produced with regularity as something in the nature of a recurring profit from the land.

We think the transaction by reason of which the sum of £1,440 was received by the appellant was neither more nor less than the conversion into money of part of her capital, and therefore was not income.

Appeal allowed. Order of Draper J. discharged. Assessment varied by striking out the sum of £1,440. Respondent to pay the costs of the appeal to the Supreme Court and of this appeal.

Solicitors for the appellant, M. Crawcour.

Solicitor for the respondent, J. L. Walker, Crown Solicitor for Western Australia.