Cobb & Co Ltd v Federal Commissioner of Taxation [1959] HCA 38; (1959) 101 CLR 333 (27 August 1959)

HIGH COURT OF AUSTRALIA

COBB & CO. LTD. v. COMMISSIONER OF TAXATION [1959] HCA 38; (1959) 101 CLR 333

Income Tax (Cth.)

High Court of Australia
Windeyer J.(1)

CATCHWORDS

Income Tax (Cth.) - Allowable deductions - Gift to "public fund established and maintained exclusively for providing money for the acquisition, construction or maintenance of a building used or to be used as a school or college . . . " - Gift to fund for improvement of school playing field not within category - Income Tax and Social Services Contribution Assessment Act 1936-1955 (Cth.), s. 78 (1) (a) (xv).

HEARING

Brisbane, 1959, June 25, 26;
Sydney, 1959, August 27. 27:8:1959
APPEAL from the Board of Review.

DECISION

August 27.
The following written judgment was delivered:-
WINDEYER J. This is an appeal from a decision of the Taxation Board of assessment of income tax in respect of the taxpayer's income in the year ended 30th June 1955. The taxpayer had claimed that two sums, 525 pounds and 33 pounds 11s. 0d., were allowable deductions in arriving at its taxable income. The deputy commissioner disallowed this claim; and the board upheld his decision, but on grounds which were different from those which he had given for disallowing the claim. The taxpayer relies upon s. 78 (1) (a) (xv) of the Income Tax and Social Services Contribution Assessment Act 1936-1955. This provides that: - "The following shall, subject to this section be allowable deductions: - (a) Gifts . . . to . . . (xv) a public fund established and maintained exclusively for providing money for the acquisition, construction or maintenance of a building used or to be used as a school or college by a government or public authority or by a society or association which is carried on otherwise than for the purposes of profit or gain to the individual members of that society or association". The amounts in question were two gifts made by the taxpayer to a public fund known as the Barbour Memorial Fund established to set up a memorial of the late Mr. G. P. Barbour, a former headmaster of Toowoomba Grammar School. The fund was instituted at a meeting at which the Mayor of Toowoomba presided, held in the council chambers at the City Hall Toowoomba on 16th February 1954. Mr. Boyce, the chairman of the trustees of the school, in addressing the meeting explained the proposal which, according to the minutes which were tendered, was that "a fund be created to raise the necessary monies to erect a permanent memorial to perpetuate the memory of the late G. P. Barbour who was Headmaster at the Toowoomba Grammar School from 1910-1935." The minutes continue, "Mr. Boyce stated that after several ideas had been put forward as to the form that the memorial should take, it had been generally agreed that the most fitting memorial would be to carry out extensive improvements to the main school oval, which was built during Mr. Barbour's term at the school as a result of his efforts and dedicate this oval to his memory". The meeting then adopted rules for the fund and elected a committee to conduct the appeal. One of the members of the committee was Mr. W. R. F. Bolton, the managing director of Cobb & Co. Limited, the appellant taxpayer. Mr. Bolton is an Old Boy of Toowoomba Grammar School. The school is an old-established and well-known Queensland public school, mainly a boarding school. It is constituted under the Grammar Schools Act of 1860. It is not questioned that it is a school of the kind described in par. (xv) of s. 78 (i). And the fund is clearly a public fund. So that in these respects the paragraph applies. The question is whether the purpose for which the fund was established and maintained satisfies the requirements of the paragraph. (at p335)

2. The relevant clause in the rules which the meeting adopted in constituting the fund is as follows: - "Objects. The object of the appeal is to raise funds to improve and suitably equip the main oval of the Toowoomba Grammar School to establish a fitting memorial to the late Mr. G. P. Barbour, who was for twenty-five years Headmaster of the School, and a prominent citizen of Toowoomba". (at p335)

3. The progress of the matter is set out in the carefully kept minute book in which meetings of the committee are recorded. I have also had the advantage of the transcript of proceedings before the Board of Review, which was tendered by consent in these proceedings, and of the oral evidence of Mr. D. F. Thompson who was the chairman of the committee. As monies were received they were, in accordance with the rules, paid over to the trustees of the school; but they were kept in a separate account under the control of the committee of the fund and were drawn upon from time to time to pay for work at the oval which was put in hand shortly after the appeal was launched. The oval, which is in front of the main buildings of the school, had been originally built by cutting and filling an area of sloping ground. No retaining wall had been built on its lower side; and it had become uneven and had fallen away there, so that the full area was not available as a playing field. The committee after inspecting the site decided in March 1954 that the proceeds of the appeal should be applied firstly to building a retaining wall, so that by some filling inside the wall the effective playing area would be improved and enlarged. A memorial tablet was to be fixed to the wall. If the subscriptions to the fund had been more than enough for this project, the committee had in mind the building of a grandstand and other improvements. In the result, however, only the wall and the filling behind it were done. The wall is a solid masonry structure of stone with stone buttresses. At its highest part it is fifteen feet high, at its lowest three feet. The total cost of it was 2,670 pounds or thereabouts. It and the memorial plaque set in it absorbed virtually the whole fund. The taxpayer was the principal subscriber. Indeed it gave about half the total amount received - the two amounts now in question in the year of income 1955 and a similar sum in the next year. The wall was a more costly undertaking than had been expected; and after it had been commenced the committee became concerned that the subscriptions coming in would not be sufficient for it to be completed. Mr. Bolton when giving the first sum here in question, five hundred guineas, expressly said it was to enable the work on the wall to go on. (at p336)

4. I have set out these facts because some argument was founded on the fact that when the taxpayer's subscription was made the actual purpose to which it would be devoted was known and indeed stipulated. The particular way in which effect was given to the general object, "to improve and suitably equip the main oval", had thus become defined at an early date. Nevertheless the fundamental question is for what the fund was, in the words of the Act, "established and maintained", not how it was actually used. It is clear from the fact that the initial resolution was "to erect a permanent memorial", and from the whole tenor of the proposal, that the trust on which money subscribed was received was that it was to be applied to some work of a permanent character improving the oval. The work actually undertaken - building the wall - was within the scope of the objects for which the fund was "established"; and it was the purpose for which, from March 1954 onwards, the fund was "maintained". It is convenient, therefore, to test the matter first by reference to this work; for if a fund to be devoted to building the wall be outside the provisions of the Act the taxpayer must fail. (at p336)

5. Can the fund be said to have been established and maintained exclusively for providing money for the acquisition, construction or maintenance of a building used or to be used as a school or college . . .? At one stage the Deputy Commissioner of Taxation informed the taxpayer that the claim for a deduction was disallowed because of the presence of the word "exclusively" in the statutory provision, and because the fund would not necessarily be expended on "structural improvements". He said too that it appeared that "it could not be said that the oval would be used exclusively for school purposes," apparently because matches with outside bodies would on occasions be played there. These contentions were however irrelevant; and they were abandoned later. The word "exclusively" in the Act properly refers to the purposes or objects for which the fund is established or maintained. It does not refer to the use of the building. For example, a fund to acquire a building and also to provide books etc. would be outside the Act, and so would a fund for the acquisition of a building and the endowment of a scholarship. But to be within the Act a building has only to be used as a school. A school building that on occasions is used for purposes other than teaching - for example, for educational conferences, parents' meetings, etc. - may still be properly said to be used as a school. And the occasional gratuitous use of a school building for the meetings of an outside body is not necessarily incompatible with its being a building used as a school. (at p337)

6. The question comes to this: is a fund for the improvement of a school playing field by, for example, the construction of a large retaining wall, a fund for providing money for the acquisition, construction or maintenance of a building used or to be used as a school? In my opinion it is not. Numerous cases were cited to show that sometimes a wall or an embankment or similar structure falls within the term "building"; and sometimes it does not. I need not go through the cases. In each of them the meaning of "building" depended upon its context and the circumstances and purpose of the particular instrument in which it appeared. No doubt a stone wall is built; and in that sense it is a building. No doubt too the school oval could be said to have been built. Indeed the original resolution at the public meeting described it as built by Mr. Barbour - and in that sense work done on it could be said to be for the maintenance of a building. But, for the purposes in hand, this involves a strained and inappropriate use of the word "building". And moreover, what I have to consider is the meaning of the composite expression "building used or to be used as a school". The only reason why the matter admits of any argument is that this expression is so clumsy in its context that it is hard to know to what par. (xv) of s. 78 is applicable. "A building used as a school" may, depending on circumstances, mean the single schoolroom of a very small country school, or a large building or group of buildings containing classrooms, assembly hall, laboratories, library, often a chapel, cloakroom, lavatories, dormitories, gymnasium and so forth. But would a fund to build a laboratory or a library or a chapel or a gymnasium or a fives court or a swimming pool at an existing school be for "the acquisition, construction or maintenance of a building used or to be used as a school"? Could any of these things be said to be "used as a school"? And if one why not another? If a laboratory, why not a library? If a library, why not a gymnasium or a swimming pool or a fives court? And if a gymnasium or a swimming pool, why not a cricket ground? A playing field is, especially in the case of a boarding school, a place where the activities of the school are carried on just as much as is the library or the assembly hall. Such arguments are plausible but mistaken. If the words of the Act had been "used for the purposes of a school" the problem would be easier. But whether, even then, this fund could be said to be within the description would, I think, be very doubtful. It may well be that what Parliament had in mind were funds to be devoted to the provision or maintenance of permanent capital assets of a school, such as buildings and grounds to be used for school purposes. But this is not what the Act says. The matter obviously deserves the attention of Parliament; for, as it stands, the provision seems to have a limited, arbitrary and somewhat uncertain application. The expression "used as" instead of "used for the purposes of" when employed in connection with land or buildings is always likely to cause difficulties and inconsistencies (see, for example, Lancashire and Yorkshire Railway v. Liverpool Corporation (1915) AC 152 ). But the words "building used as a school", whatever their application may be in other cases, are, in my view, fatal to the taxpayer's contention in this case. (at p338)

7. In the correspondence tendered there is a suggestion that some statement had been made that gifts to the fund would be deductible for taxation purposes. But it is not suggested that any such statement was ever made with the authority of the Taxation Department. Some misapprehension may have occurred because of the objects listed in s. 78. These include war memorials; and some projects have perhaps somewhat spuriously been called war memorials to make easier the raising of money for them. That the fund here in question was a memorial fund, although not a war memorial, and was to be expended in aid of a school may, at one stage, have led to a belief that somehow subscriptions would be allowable deductions for taxation purposes. But this was a mistaken view. (at p338)

8. The decision of the Board of Review was right and the appeal must therefore be dismissed. (at p338)

ORDER

Appeal dismissed with costs.