|
|
[Home]
[Databases]
[WorldLII]
[Search]
[Feedback]
High Court of Australia |
A.G.C.(ADVANCES) LTD. v. FEDERAL COMMISSIONER OF TAXATION [1975] HCA 7; (1975) 132 CLR 175
Income Tax (Cth)
High Court of Australia
Barwick C.J.(1), Gibbs(2) and Mason(3) JJ.
CATCHWORDS
Income Tax (Cth) - Deductions - Bad debts - Whether assigned before writing-off - Debts not brought to account as assessable income - Debts under hire- purchase agreements incurred in course of taxpayer's business - Whether loss capital or income - Loss in year after year of deriving assessable income - Continuing business - Income Tax Assessment Act 1936-1971 (Cth), ss. 51 (1), 63 (1).**Section 63 (1) of the Income Tax Assessment Act 1936-1971 (Cth) provided: "Debts which are bad debts and are written off as such during the year of income, and - (a) have been brought to account by the taxpayer as assessable income of any year; or (b) are in respect of money lent in the ordinary course of the business of the lending of money by a taxpayer who carries on that business, shall be allowable deductions."
HEARING
Sydney, 1974, August 12;DECISION
1975, February 26.
2. Until 17th April 1970 the appellant was a subsidiary of Master Butchers
Ltd., a company incorporated in South Australia under
the provisions of the
Industrial and Provident Societies' Act 1864 (S.A.). During the time the
appellant carried on business as such
a subsidiary, its hire-purchase
transactions were mainly entered into in respect of customers of a group of
companies which manufactured
or dealt in small domestic electrical appliances
sold by door to door canvass throughout the States of mainland Australia. In
respect
of each hire-purchase transaction, the appellant kept in its accounts
an item styled "interest" which represented the amount of the
terms charges
payable under the hire-purchase agreements less the sum allowed to the company
introducing the transaction in return
for an indemnity to the appellant
against default by the hirer. It is conceded that the appellant returned as
assessable income a
total of the sums thus described as terms charges. (at
p178)
3. In December 1968 inspectors were appointed under the Companies Act (S.A.)
to investigate the appellant's affairs, whereupon the
appellant suspended its
business operations, except for carrying out certain transactions of no
present moment. On 13th March 1969
the Supreme Court of the State of South
Australia approved a scheme of compromise and arrangement (the scheme) in
relation to the
appellant, Master Butchers Ltd. and Combined Industries Ltd. -
another subsidiary of Master Butchers Ltd. The scheme became operative
on 17th
March 1969 (the scheme commencement date). The issued capital of the appellant
at that date consisted of 1,000,000 shares
of $2 each paid to the sum of 30c
each, of which Master Butchers Ltd. held 990,940 in its own name and had some
part of the balance
of the issued capital held in trust for it. There was an
uncalled liability of $1,700,000 in respect of all of its shares. (at p178)
4. At that date there was due to the appellant a large sum for money lent and
for balances due on hire purchase. It is conceded
that at that date the
appellant was the legal and beneficial owner of these book debts. (at p178)
5. The scheme was in the nature of a creditor moratorium in respect of all
three companies for the space of five years from the
scheme commencement date.
Under the scheme a special manager was appointed for its term. He was to be
the agent of each company to
conduct its affairs as part of the group
companies (Master Butchers Ltd., the appellant and Combined Industries Ltd.),
with power,
also described in the document as a duty:
1. To enter into possession of and recover all the assets of the group
companies (meaning of each of the said group of companies).
2. (i) To carry on the business of Master Butchers Ltd. and of Combined
Industries Ltd. in any way he should deem most advantageous
and beneficial to
the interests of members and scheme creditors. (ii) To wind up the affairs of
the appellant and to realize its
assets and to have power to carry on the
appellant's business to such an extent as the manager might think necessary
for the beneficial
winding up of the appellant, with power to sell the
undertaking of the company and the losses and structure of the appellant.
3. To take such steps by way of legal proceedings or otherwise in the name
of the company as he might consider necessary to get
in the debts due to the
group companies.
4. To realize any asset of the group companies as he might think fit and, in
consultation with the financial advisers and auditors
of the group companies,
write off any debt shown in the books of one of the companies.
5. To pay any dividend to scheme creditors whenever there are sufficient
funds in the group companies' bank account to do so. (at
p179)
6. The special manager was to pay into a nominated bank account all moneys
received by the group companies. During the continuance
of the scheme
seventy-five per cent of the group companies' trading profit was to be
available for distribution to scheme creditors
who should rank equally for
dividend on the amounts proven by them to be owing by any of the group
companies. Provision was made
for the ascertainment of the scheme creditors.
(at p179)
7. The scheme provided for priority of payment amongst the scheme creditors
and subject to certain priorities, the special manager
was to appropriate all
other moneys not otherwise required for the purposes of the scheme and
available for distribution, to payment
of dividends and interest to scheme
creditors in the same priority and order as if the group companies were being
wound up. In his
dealings with third parties, the special manager was to
conduct the same on behalf of the group companies under the disclosed
authority
of himself as special manager. It was provided that if the
contingent obligation of Master Butchers Ltd. to the appellant of $1,700,000
in respect of uncalled capital were waived, the net worth of Master Butchers
Ltd. as at 1st December 1968, namely $675,000, would
during the continuance of
the scheme be distributed to scheme creditors. However, it was provided that
on and from the commencement
date of the scheme, all scheme creditors who were
then creditors of the appellant would become creditors of Master Butchers
Ltd.,
and that any claim which they might have or, but for the scheme, would
have had against Waymouth should thereafter be deemed to be
against Master
Butchers Ltd. which assumed full liability therefor. (at p180)
8. The special manager collected money from debtors of the appellant and paid
it into a special manager's account as directed by
the scheme. Out of this
account the special manager was able to pay a dividend of twenty cents in the
dollar to the scheme creditors
in October 1969, and another dividend of ten
cents in the dollar in June 1970. (at p180)
9. On 23rd December 1969, by an agreement in writing between Master Butchers
Ltd., the appellant, the scheme manager and the Australian
Guarantee
Corporation Ltd. of Phillip Street, Sydney, Master Butchers Ltd. agreed to
sell, and the Australian Guarantee Corporation
as purchaser to buy, Master
Butchers Ltd.'s shareholding in the appellant for the sum of $14,500 payable
in cash against the handing
over of share transfers duly executed. (at p180)
10. It was agreed that prior to the date of completion of the purchase of the
shares, the appellant in reduction of its indebtedness
to Master Butchers Ltd.
would transfer to Master Butchers Ltd. all its assets other than debts owing
to the appellant, in consideration
of the release by Master Butchers Ltd. of
the appellant from all debts and liabilities present and future and all claims
which Master
Butchers Ltd. might have against the appellant at the date of
completion, including any arising after that date out of any transaction
or
omission prior to the date, to the extent to which the amount of those claims
might exceed the total amount of money otherwise
payable under the agreement
by the appellant to the Master Butchers Ltd. (at p180)
11. The appellant agreed with Master Butchers Ltd. and the special manager to
pay to Master Butchers Ltd. in reduction of its indebtedness
as and when
demanded by the manager or by Master Butchers Ltd., such amount as was equal
to the net amount received by the appellant
after the date of completion by
way of collections of the debts due to it, up to an amount of $2,750,000 after
deducting all costs
and expenses incurred by the appellant in the collection
or attempted collection of the debts, including commission paid to any
collecting
agent. (at p180)
12. The appellant also agreed with Master Butchers Ltd. and the special
manager that it would pay Master Butchers Ltd. in reduction
of its
indebtedness an amount equal to twenty-two and a half cents in the dollar of
the amount by which the deduction for debts written
off in any year exceeded
the amount of the pre-acquisition assessable income of that year. The
expression "pre-acquisition assessable
income" was defined as all amounts
brought into account as assessable income of the appellant in any assessment
of its income for
any year and arising out of any transaction entered into by
the appellant before the date of completion, including any collections
of the
debts whether before or after the same are written off. There were other
obligations undertaken by the company to Master Butchers
Ltd. to which I need
not refer. (at p181)
13. On 17th April 1970 by deed the Master Butchers Ltd. released the
appellant from all debts and liabilities both present and future,
and all
claims which the Master Butchers Ltd. might have had against the appellant at
the date of completion including any arising
after the date of completion out
of any act, transaction or omission prior to the date of completion to the
extent to which the amount
of those claims exceed the total of money expressed
to be due or payable by the appellant to the Master Butchers Ltd. under
specified
clauses of the agreement to which I have already referred. (at
p181)
14. On 17th April 1970 the appellant appointed Master Butchers Ltd. its agent
for a period of five years from that date to collect
and receive in trust and
deliver to the appellant or its banker as the appellant might direct, all sums
received in respect of debts
owing to the appellant at 17th April 1970, and
Master Butchers Ltd. was authorized in the name of the appellant to commence
proceedings
for the recovery of such debts. (at p181)
15. The transfer of shares was completed on 17th April 1970 whereupon the
appellant resumed the business of a financier as before.
On 8th May 1970 the
name of the appellant was changed to its present name. The appellant has since
continued to carry on business
as such a financier. (at p181)
16. In the year ended 30th June 1970 the appellant wrote off as bad debts
amounts totalling $243,838 shown in its books as owing
to it at the beginning
of that year. The sum of $243,838 comprised:
1. The sum of $76,296 being debts due for money lent.appellant in respect of hire-purchase agreements, and brought to account as assessable income in years prior to the year ending 30th June 1970.
2. The sum of $38,620 being the total of certain hiring charges made by the
17. The appellant in its return of income for the year ended 30th June 1970
claimed the sum of $243,838 as a deduction. The Commissioner
disallowed the
whole claim. (at p181)
18. In the year ending 30th June 1971 the appellant wrote off as bad debts
amounts totalling $1,126,117 shown in its books as owing
to it at the
beginning of that year. The sum of $1,126,117 comprised:
1. A sum of $765,367 due for money lent.represented the total of hiring charges which had been returned as assessable income during years prior to the year ending 30th June 1971. (at p182)
2. $360,750 due under hire-purchase agreements, of which the sum of $90,861
19. Of the balance of $269,889, part of the said sum of $360,750, the
respondent concedes that no more than $220,000 was owing to
the appellant at
the date of the writing off. Again some part of the $220,000 represented debts
for an amount of $35,000 in respect
to which the Statute of Limitations might
have been pleaded. (at p182)
20. In its return of income for the year ended 30th June 1971 the appellant
claimed the sum of $1,126,117 as a deduction which the
Commissioner
disallowed. (at p182)
21. The questions asked by the case raise the validity of the claims to
deduction in respect of these amounts. The claim as to the
debts for money
lent and for hiring charges is made under the provisions of s. 63 of the
Income Tax Assessment Act (1936-1970)(the
Act). The claim as to the other
parts of the instalments due under hire-purchase agreements is made under the
provisions of s. 51
of the Act. (at p182)
22. The basis of the Commissioner's disallowance of the claim to the
deduction for the bad debts, for money lent and for hiring
charges was that
upon its proper construction the scheme extinguished the beneficial ownership
of the appellant in its book debts
as at the commencement date of the scheme,
and that the case was governed by this Court's decision in G.E. Crane Sales
Pty. Ltd.
v. Federal Commissioner of Taxation [1971] HCA 75; (1971) 126 CLR 177 . In that
case, upon a construction of a scheme of arrangement,
the Court
held that the
company to whom the debts
had been incurred, and whose affairs were the
subject of the scheme of arrangement,
had by
the terms of the scheme lost its
beneficial
interest in those debts and had no interest in them at the time it
purported to
write
them off as bad debts. The case turned on the
construction
of the scheme of arrangement and on the particular facts of that
case.
(at
p182)
23. The submission of the Commissioner in the present case is that, under the
scheme here, there was by implication an assignment
by the appellant of its
beneficial interest in all the book debts due to it at the date of the
commencement of the scheme, and that
consequently at the time it purported to
write off the debts there were no such debts due to it. Counsel for the
Commissioner agreed
that that was the only question of law in the case and
that the appellant must succeed if in truth there was no such assignment.
The
Commissioner begins with the concession that the legal title to the debts did
not leave the appellant, and that there are no
express words of assignment in
the scheme of the beneficial interest in the debts. However, he insists that
upon the construction
of a scheme as a whole it must be concluded that the
clear intention of the scheme was that the appellant should from its date
cease
to have any beneficial interest in the debts. (at p183)
24. After careful consideration of all that was put to the Court by counsel
for the Commissioner, I am unable to find in the scheme
any support for the
Commissioner's submission. Indeed at every point the indications in the
scheme, in my opinion, are to the contrary.
The scheme, as I have said,
constituted a creditors' moratorium for a given number of years. Master
Butchers Ltd., of which the appellant
was then a subsidiary, under the scheme
"took over" the debts due by the appellant, and the creditors of the
appellant, of Master
Butchers Ltd. and of the other subsidiary became as they
were styled "group creditors". The principal sources from which the scheme
contemplated that the group creditors might receive payment of their debts or
at any rate dividends in respect thereof were firstly,
the amount collected
from debtors of the appellant, and, secondly, part of the profits which might
be made by carrying on the business
of Master Butchers Ltd. by the special
manager. Debts due to the appellant as they were recovered were to be paid
into the special
manager's account, as were seventy-five per cent of the
trading profits of Master Butchers Ltd. The special manager was to take
possession
of the assets of the appellant including its book debts. As agents
of the appellant the special manager was to recover the debts,
and on recovery
pay the proceeds into the nominated account as a contribution to a fund out of
which dividends would be paid to the
group creditors. Not merely were there no
words of assignment to the special manager or to the group creditors of the
debts owing
to the appellant, but it was quite unnecessary for the purpose of
implementing the scheme that the special manager should have any
property,
legal or equitable, in those debts. It was sufficient that he was put in
possession of them, authorized as an agent of
the appellant to collect them,
and placed under an obligation to use the proceeds for the benefit of
creditors. Of course, upon the
collection of money in satisfaction of a debt
due to the appellant, the appellant lost its property in the debt to the
extent of
the amount collected, and the money collected was at the disposal of
the special manager. But that conclusion denies an assignment
of the debt at
the commencement of the scheme. (at p183)
25. It is true that under the scheme the group creditors agreed to accept
whatever came to them under the scheme in satisfaction
of what was due to them
from any one of the three companies - the appellant, Master Butchers Ltd. and
Combined Industries Ltd.: that
is to say that on the expiry of the scheme the
debts of the group creditors would be deemed to have been paid. But that fact
does
not warrant any inference that the group creditors were to be entitled to
so much of the debts of the appellant as had not been collected
at the
termination of the scheme. No provision whatever was made by the scheme for
the transfer to the group creditors of such debts
at the termination of this
scheme; nor was there any mechanism whereby such debts could then be collected
by or on behalf of the
group creditors. In my opinion, the proper construction
of the scheme is that for its period the special manager as agent of the
appellant was to collect as much of the debts due to the appellant at the date
of the commencement of the scheme as he could, and
that upon the expiry of the
scheme his authority would cease; meantime the terms of the scheme determined
how the moneys collected
were to be dealt with. The debts remained throughout
in the legal and equitable ownership of the appellant and on the expiry of
this
scheme could be dealt with by the appellant as its own. In my opinion,
there was no assignment whatever of the debts due to the appellant
either to
the special manager or to the group creditors or to Master Butchers Ltd. That
being so, nothing said by the Court in G.E.
Crane Sales Pty. Ltd. v. Federal
Commissioner of Taxation [1971] HCA 75; (1971) 126 CLR 177 has any bearing on the resolution
of
the present question.
In my opinion the appellant was entitled to the
deduction
claimed in respect of the amounts written off in
each year for debts
due,
for money lent, and for hiring charges in respect of hire-purchase
agreements as claimed. (at p184)
26. The other component, the unpaid instalments of hire, clearly cannot be
written off under s. 63 of the Act. But, in my opinion,
they may be written
off under s. 51. The appellant was in business in financing hire-purchase
transactions. Following a common commercial
practice it took title to the
chattel, paying out the seller of it and then hiring it under hire purchase to
the "purchaser". In
this way the cost of the chattel became part of what may
properly be described as circulating capital. The purchase of the chattel
for
the purpose of enabling the legal formalities of hire purchase to be observed
was not the acquisition of a capital asset. It
was the acquisition of
something much more akin to trading stock. In my opinion upon the failure to
recover the amount paid for the
chattel there was a trading loss made in the
gaining of assessable income, that assessable income being the hiring charges
made by
the hire-purchase agreement under which the chattel was made available
to the hirer. (at p184)
27. Of course, it will be the actual amount thus lost by the appellant which
will be deductible; that is to say the actual amount
which the appellant could
claim as a debt from the hirer at the time the amounts are written off. There
has been no particular examination
in this case of what that sum might be. But
the concession by the Commissioner that certain sums were owing to the
appellant at the
date when the writing off took place suffices to establish
what the appellant lost in not recovering the amount of the instalments
of
hire (excluding hire charges). (at p185)
28. We were informed by both counsel at the outset of the argument in this
case that there was only one matter to be decided, namely,
whether by the
scheme upon its proper construction the appellant had assigned its beneficial
interest in the debts due to it at the
date of the commencement of the scheme.
Indeed, counsel for the Commissioner in opening his argument expressly said
that unless he
could make good the proposition that the appellant had so
assigned its beneficial interest in the debts the appellant must succeed
in
the case. (at p185)
29. However, notwithstanding these statements, counsel at the end of his
argument raised two further points. The first point was
that, upon the
assumption that there had been no assignment of the beneficial interest in the
debts, no precise relationship existed
between the writing off of the debts,
which for this purpose seems to have been regarded by counsel as the time at
which the loss
was incurred, and the gaining of assessable income which was
the subject of the return in the particular year in which the deduction
was
sought to be made. The second point was that the business carried on by the
appellant at the termination of the scheme was a
different business to that
which the appellant carried on before the scheme was entered into; or put
another way that the break in
the conduct of the appellant's business during
the period of the operation of the scheme, prevented the business being
regarded as
a "continuing" business. Reliance was placed in this connexion
upon the decision of this Court in Amalgamated Zinc (De Bavay's) Ltd.
v.
Federal Commissioner of Taxation [1935] HCA 81; (1935) 54 CLR 295 . (at p185)
30. The first of these points is clearly insupportable. It is not possible
now, to construe s. 51 to mean that the expenditures
and losses to be deducted
must relate precisely to the assessable income which is returned for a year in
which the expenditures are
made or the losses are suffered. In the application
of this unduly condensed provision, it has not been possible to utilize the
definite
article so as to require the expenditure in question to have produced
or to have assisted to produce the assessable income of the
particular year of
the expenditure. Nor can it be construed to require that the loss be similarly
related to the assessable income
of the particular year - see Commissioner of
Taxation v. Finn [1961] HCA 61; (1961) 106 CLR 60 and cases there cited. (at p185)
31. Thus expenditure in a particular year, for stock which may remain on hand
being progressively sold over a period of years, will
be allowable in the year
in which the purchase is made, although in truth it may be demonstrable that
no part of that which was purchased
was sold in that year and therefore that
it did not directly contribute to the assessable income of that year. Equally,
payment for
goods which had been purchased and sold in a prior year will be
allowable as a deduction in the year that payment to the creditor
is made, see
Ward and Co. Ltd. v. Commissioner of Taxes (1923) AC 145, at p 148 . (at
p186)
32. In Amalgamated Zinc (De Bavay's) Ltd. v. Federal Commissioner of Taxation
[1935] HCA 81; (1935) 54 CLR 295 , the expression
"a continuing business"
was used to qualify
the occasion when an expenditure not precisely related
to the assessable
income of a
particular year was an allowable
deduction. This description was
intended, in my opinion, to convey
the notion that in the case of
an
expenditure, the business of
the taxpayer in respect of which the expenditure
was made would probably
in due course reflect in
its income the proceeds or
effects
of that expenditure, or that it would already have done so where the
expenditure was discharging
an outstanding liability. I do not
regard the
expression "continuing" in such a temporal sense that if
there were any break
in the
carrying on of the business for some
reason, the business could not be
regarded relevantly as continuous.
(at p186)
33. In any case, Amalgamated Zinc (De Bavay's) Ltd. v. Federal Commissioner
of Taxation [1935] HCA 81; (1935) 54 CLR 295 was concerned
with an
expenditure and not with
a loss. Its facts were unusual, the appellant company having discontinued
its
business in connexion
with
the recovery of metals and having become an
investment company. Its assessable income in the particular
year was derived
wholly
from
investment, leaving aside some trifling transactions with which I
need not concern myself. The time
interval between the conclusion
of the
business of recovering minerals and the tax year in question was considerable.
The case passed
off against the taxpayer on
the footing that there was no
possible relationship between the expenditure and the assessable income
in the
tax year in question.
Although the case was not concerned with the incurring
of a loss, Sir John Latham observed upon the
difficulty of regarding a loss
as
something which could gain or produce income. He suggested a reading of the
section which retained
the definite article. He decided
that if the
expenditure in question in the case were to be regarded as a loss it could not
have
been made in the course of carrying
on a business. (at p186)
34. Perhaps it would have been more satisfactory in that case to have read
the section there under consideration in a sense which
related expenditure or
loss to the gaining of assessable income which may have been already gained
and returned or which may yet
be gained and returned. See the discussion in
Ronpibon Tin N.L. v. Federal Commissioner of Taxation [1949] HCA 15; (1949) 78 CLR
47, at p
56 , where
it is suggested that the reference to the assessable income is
really a reference to "assessable
income" generally.
In the case of
Amalgamated Zinc (De Bavay's) Ltd. v. Federal Commissioner of Taxation [1935] HCA 81; (1935)
54 CLR 295 , the liability
to make the workers' compensation
payments was
undoubtedly a liability which was incurred in the
gaining of assessable income
upon
the mineral-recovering activities.
That income had already been returned.
It may be that, because
of the terms of the Income Tax
Assessment Act, the
current value of
the payments to be made in the future under the Workers'
Compensation
(Broken Hill) Act, 1920
could not have been deducted in
determining
the assessable income of any one year. But the obligation to
make
the payments was a
business liability which sprang out of the carrying
on of
the business which had yielded assessable income.
On a construction of
the
section which included expenditures which related
to the gaining of assessable
income "generally", it might
properly have been
said that the later payments
of compensation had been
incurred as a cost of gaining the assessable income
which
had already been
returned and taxed. But an interpretation was adopted
which required a relationship of some undefined kind between
the expenditure
and the assessable income of the year in question. This
interpretation, whilst
on the one hand not requiring the
tracing of the expenditure
into the
assessable income of the particular
year, does require some relationship
between the expenditure
and the assessable income
of that year. No particular
logical prescription
of that relationship is suggested in the judgment of the
Court. (at p187)
35. However that may be, I do not regard that case as deciding that, even in
the case of expenditure, the business in respect of
which the expenditure is
made must be or has already been carried on without any substantial break. It
seems to me that the most
that could be deduced from the construction of the
section applied in Amalgamated Zinc (De Bavay's) Ltd. v. Federal Commissioner
of Taxation in relation to an expenditure is that where there has been a break
in the carrying on of the business yielding the assessable
income of the
particular year that business must in its nature be substantially the same as
that which was carried on at the earlier
period of time. (at p187)
36. But in any case, in my opinion, Amalgamated Zinc (De Bavay's) Ltd. v.
Federal Commissioner of Taxation has nothing to say as
to the deduction of
losses. It is quite clear that a loss may not show up for years after money
has been ventured in a business.
The present is a very good illustration. The
hire-purchase agreement was entered into, and after a period default is made
not only
in making the agreed instalments, but in the return of the goods. A
considerable interval of time may well elapse between the date
of the
hire-purchase and the realization that neither the instalments nor the goods
are recoverable. The loss from an accounting
point of view must occur at the
time when the appellant accepts the position that the debt is irrecoverable.
If a hire-purchase company
decided to wind up and to discontinue the granting
of hire-purchase agreements in a particular year, and in a subsequent year the
company in liquidation found itself unable to recover instalments of hire on
the goods in circumstances which caused it to write
the amount off as a bad
debt, it seems to me not merely unjust but unacceptable to hold that it could
not deduct that loss as a loss
which it had incurred in the course of gaining
assessable income. The problem of deciding whether any and if so what
relationship
should exist between the assessable income of the particular year
and the loss, in my opinion, does not arise as it has done in relation
to any
expenditure. (at p188)
37. It is clear enough, it seems to me, that in order to be a relevant loss
it must be a loss of money which has been put out in
order to gain assessable
income. It may be, and I have no need to decide that question at the moment,
that if a long period of years
separated the two events and meantime the
company had started a different business or become an investment company as in
Amalgamated
Zinc (De Bavay's) Ltd. v. Federal Commissioner of Taxation, it may
be necessary if that decision is followed in such a case to say
that the
relationship between the two had ceased to be sufficiently proximate. It would
suffice for my present purpose that I am
not satisfied that, in order to be
deductible, the loss which flows from carrying on a business carried on to
gain assessable income
need necessarily occur in a year when the company is
actively carrying on that business. (at p188)
38. Further, in the present case, the facts, in my opinion, satisfy the idea
of a "continuing" business except upon the very narrow
view that a business is
not relevantly continuing if it has had any substantial break in its
continuity, a view which as I have indicated
I am unable to accept. Here the
scheme was entered into, it seems to me, in order to enable the companies to
extricate themselves
from their financial embarrassment so as to be able, if
they so chose, to continue to carry on the business which had caused them
the
financial embarrassment. The break in years was relatively short. The fact
that the company changed its name in the circumstances
of this case can have
no possible bearing, in my opinion, upon the nature or continuing nature of
the business which the company
was carrying on: nor does it matter, in my
opinion, that the address from which it conducted its affairs was changed. The
nature
of the company's business, both before and at the conclusion of the
scheme when the company resumed activities, was that of a financier,
lending
directly to borrowers and also servicing hire-purchase agreements. There was
no change in the nature of the business at all.
I conclude that in point of
fact it was the same business which was carried on after a break, a break
which it might be noted was
not for the purpose of abandoning the business but
rather to enable its continuance. (at p189)
39. Since writing the above, I have had the advantage of reading the reasons
for judgment prepared by my brother Mason. Having done
so, I am in agreement
with his opinion that the question of construction of s. 51 is not concluded
by Amalgamated Zinc (De Bavay's)
Ltd. v. Federal Commissioner of Taxation
[1935] HCA 81; (1935) 54 CLR 295 and with his conclusion that the words "the assessable
income" in that
section mean assessable income of the
taxpayer generally
without regard to division into accounts periods. I am in
agreement with
the
reasons which my brother gives for
that opinion and conclusion. (at p189)
40. In my opinion, the submissions of the Commissioner are insupportable: for
that conclusion I have indicated a number of reasons.
The simplest is one of
fact, namely that the business was the same business which was carried on
after the finish of the scheme as
was carried on before. But, in any case, in
my view of the section a loss of the circulating capital which had been used
to gain
assessable income is, in my opinion, deductible. (at p189)
41. I am, therefore, of the opinion that the appellant was entitled to a
deduction of the amounts written off which were conceded
by the Commissioner
then to have been owing. (at p189)
42. The questions should be answered:
(a) Yes.sums due under hire-purchase agreements of
(b) Yes to a deduction of $76,296 for the year ending 30th June
1970 under s. 63 and to a deduction of $765,367 for the year ending
30th June 1971 under s. 63.
(c) The appellant is entitled to a deduction under s. 63,
(i) of $38,620 hiring charges written off in the year ending 30th
June 1970; and (ii) of $90,861 hiring charges written off in the year
ending June 1971; and to a deduction under s. 51 in respect of principal
(i) $100,000 written off in the year ending 30th June 1970; and
(ii) $220,000 written off in the year ending June 1971. (at p189)
43. It is unnecessary to answer specifically the question as framed. (at
p189)
GIBBS J. I have had the advantage of reading the reasons for judgment
prepared by the Chief Justice and need not repeat his statement
of the facts
of this case. Two main questions arise for consideration. The first is whether
by entering into the scheme of compromise
and arrangement the appellant parted
with its interest in the debts at that time owed to it. If so it could not, by
purporting to
write off those debts, obtain a deduction under s. 63 (1) of the
Income Tax Assessment Act 1936 (Cth), as amended ("the Act"): G.E. Crane Sales
Pty. Ltd. v. Federal Commissioner of Taxation [1971] HCA 75; (1971) 126 CLR 177
. No
particular
form of words is necessary to create an equitable assignment, and
express words of assignment
need not be used for
that purpose.
The question
whether the scheme operated as an immediate assignment of the debts owed to
the appellant
depends upon
its proper construction.
There can be no doubt that
the scheme operated as an assignment of those debts that were in
fact
collected
by the special manager.
Once the amount of a debt had been received
by the special manager it was his duty to pay
it into the bank
account out of
which the
dividends and other payments referred to in the scheme were required
to be made. The provisions
having this
effect revealed an intention
to divest
the appellant of its beneficial interest in any debt once it was collected.
However,
there
is nothing in the scheme to
reveal any intention to deprive the
appellant of the beneficial interest in any debt which the
special
manager did
not collect. The
fact that the collections were to be made by the special
manager as agent for the appellant
suggests
that at the moment of collection
the appellant was still the owner of the debts. Although the scheme speaks of
the "powers
and duties"
of the special manager, it
is apparent that it was not
intended that the special manager should be obliged to exercise
all the powers
given to him by the scheme.
Indeed, some of those powers could not be
exercised consistently with others; for example,
there was
a power to engage
or dismiss
persons as employees. In particular it could not have been intended
that the special manager
should
be bound to enter into possession
of and
recover all of the assets of the group companies, although he had power to do
so;
it was
contemplated that the group companies
might continue to trade and
this would have been impossible if they were to have no
assets.
It was
provided that the appellant should
cease to be a party to or affected by the
scheme if its structure was sold by the
special
manager and in any case the
scheme was
to determine automatically at the expiration of five years. It was
possible that assets
of
the appellant would remain unrealized
when the scheme
ceased to affect the appellant or determined automatically and in the absence
of any express provision to the contrary
it must have been contemplated that
those assets should remain in the same ownership as
before - namely, in the
ownership of the
appellant. Moreover, the scheme did not provide for the
consequences of a realization sufficient
to pay all the scheme creditors
in
full - an event that was perhaps unlikely, and did not in fact occur, but that
was not impossible,
for example if Master Butchers
Ltd. had made unexpectedly
large trading profits. It must have been contemplated that in that event
also
the property in the unrealized
assets should remain in the appellant. These
considerations support the view that the intention
of the framers of the
scheme was
that the appellant should remain the owner of the debts owed to it
unless and until those debts
were collected by the special manager
and there
is nothing in the scheme that points to a different conclusion. (at p191)
2. The scheme in the present case presents points of similarity to that
considered in G.E. Crane Sales Pty. Ltd. v. Federal Commissioner
of Taxation.
In that case the taxpayer had never owned the debts in law and it was held
that after the scheme took effect the taxpayer
had lost its beneficial
interest in the debts. It would not serve any useful purpose to compare in
minute detail the provisions of
the schemes in the two cases but the broad
point of distinction between them may be seen from the following statement
made by Walsh
J. in G.E. Crane Sales Pty. Ltd. v. Federal Commissioner of
Taxation (1971) 126 CLR, at p 189 as to the effect of the scheme in
that
case:
"It was not merely that the control and possession of theThere was no similar concession as to the effect of the scheme in the present case and it is not right to say, upon the proper construction of the scheme, that upon its commencement the appellant ceased to have any right to receive or retain moneys paid in respect of the debts owing to it. Moreover, the provisions of cl. 21A of the scheme which are referred to in G.E. Crane Sales Pty. Ltd. v. Federal Commissioner of Taxation (1971) 126 CLR, at pp 190, 194 had no counterpart in the scheme in the present case. (at p191)
property of the appellant, including the debts, were vested in the
scheme receiver and manager or in the scheme administrator.
But, as the case stated asserts, as from 21st June 1966 the
appellant 'was not entitled to receive or to retain amounts paid
in respect of such debts'."
3. It follows that the debts which were not realized by the special manager
remained owing to the appellant and were therefore debts
that could be written
off as bad debts within the meaning of s. 63. (at p191)
4. Of the debts due to the appellant, those due by borrowers of money lent by
the appellant in the ordinary course of its money-lending
business clearly
fell within s. 63 (1) (b). Part of the debts due by hirers of chattels from
the appellant as owner under hire-purchase
contracts - namely, the amount
representing terms charges - had been brought to account by the appellant as
assessable income and
answered the description contained in s. 63 (1) (a). The
balance of the latter debts, however, had not been brought to account as
assessable income and was not deductible under s. 63. (at p191)
5. The submission on behalf of the appellant was that the amounts owing by
hirers which had been written off as bad debts, to the
extent to which they
had not been brought to account as assessable income, were losses "incurred in
gaining or producing the assessable
income, or . . . necessarily incurred in
carrying on a business for the purpose of gaining or producing such income"
within s. 51
(1) of the Act. The amounts written off were of course losses. It
may be assumed that the losses were incurred when the amounts were
written
off, that is, in the income tax years ending respectively on 30th June 1970
and 30th June 1971. The fact that the losses
were incidental and relevant to
the production of income in earlier years does not in itself prevent the
losses from being deductible
under s. 51: Herald and Weekly Times Ltd. v.
Federal Commissioner of Taxation [1932] HCA 56; (1932) 48 CLR 113, at p118 ; Amalgamated
Zinc (De
Bavay's) Ltd. v. Federal Commissioner of Taxation [1935] HCA 81; (1935) 54 CLR 295
; W. Nevill & Co. Ltd. v. Federal
Commissioner of Taxation (1937)
56 CLR 290,
at p 305 ; Texas Company (Australasia) Ltd. v. Federal Commissioner of
Taxation [1940] HCA 9; (1940) 63 CLR 382, at p 427 ; Ronpibon
Tin N.L. v. Federal
Commissioner of Taxation (1949) 78 CLR 49, at
pp 56-57 ; Commissioner
of
Taxation v. Finn [1961] HCA 61; (1961) 106 CLR 60,
at p 68 . However, s. 51 does not
authorize the deduction
of losses that relate to income derived in earlier
years if there has been
a complete cessation of the business in the course of
which that income was produced. This is established
by Amalgamated Zinc (De
Bavay's) Ltd. v. Federal Commissioner of Taxation [1935]
HCA 81; (1935) 54 CLR 295 . In that
case Latham C.J. said (1935) 54 CLR, at pp 303-304
;
"In this case, however, the outgoings in question have nobenevolent interpretation
relation whatever to the assessable income of the years in question.
It is true that, in cases of continuing businesses, it has been
conceded (perhaps upon a not very strict construction of this or a
similar legislative provision) that expenditure may be allowed as
a deduction though it produces and is possibly designed to
produce results in the way of income in a future year and not in
the year in relation to which income is being assessed (Ward &
Co. v. Commissioner of Taxes (1923) AC 145 ). So it has also been held
that expenditure which has a direct relation to income of a past
year can be deducted in a later assessment year where it is of
such a character that, in a continuing business, it must be met
from time to time as a part of the process of gaining assessable
income (Herald and Weekly Times Ltd. v. Federal
Commissioner of Taxation [1932] HCA 56; (1932) 48 CLR 113 ). But even this
cannot assist the taxpayer in a case like this, where there has
been a complete cessation of the income-producing operations
out of which the necessity to make the outgoing arose." (at p192)
6. In the same case Dixon J. said (1935) 54 CLR, at pp 309-310 :
"A very wide application should be given to the expressionactivities
'incurred in gaining or producing the assessable income'. But
the words refer to the assessable income from which the deduction
is to be made. In a continuing business, items of
expenditure are commonly treated as belonging to the accounting
period in which they are met. It is not the practice to institute an
inquiry into the exact time at which it is hoped that expenditure
made within the accounting period will have an effect upon the
production of assessable income and to refuse to allow it as a
deduction if that time is found to lie beyond the period. And, in
the case of expenditure for which the taxpayer contracted a
liability during an earlier accounting period than that in which it
has matured, it is not the practice to consider whether its effect
upon the production of income of a still continuing undertaking
has already been exhausted . . . The expression 'in gaining or
producing' has the force of 'in the course of gaining or
producing' and looks rather to the scope of the operations or
and the relevance thereto of the expenditure than to purpose in(See also per Rich and Evatt JJ. (1935) 54 CLR, at p 305 , and per Starke J. (1935) 54 CLR, at p 307 .) (at p193)
itself . . .
In the present case, the actual expenditure was met in the
current year. But it was completely dissociated from the gaining
or producing of the assessable income of that year . . . None of
the assessable income arose out of the business in the course of
which the taxpayer became liable to the charge. The sources
from which the assessable income did arise included no
operations in the course of which the payment was made. It was a
payment independent of the production of the income, not an
expenditure incurred in the course of its production."
7. These statements related to a provision which corresponded to the first
limb of s. 51 (1). But in my opinion exactly the same
considerations apply to
the second limb of the subsection. If in the year in which the deduction is
claimed the taxpayer is carrying
on a business entirely different from that in
the course of which he previously derived income it is not possible to say
that a loss
incurred in connexion with the business that has completely ceased
is necessarily incurred in carrying on the new business. This
does not mean
that a temporary cessation of profit-earning operations will necessarily have
the effect that losses connected with
income earned in those operations in
previous years cannot be deducted - cf. Queensland Meat Export Co. Ltd. v.
Deputy Federal Commissioner
of Taxation (Q.) (1939) St R Qd 240 . In the
present case, if the appellant, in the tax years in question, was carrying on
the same
business as that formerly carried on, although after an interruption,
the losses will be deductible provided of course that they
were not of a
capital nature. If, on the other hand, the appellant completely ceased to
carry on its previous business, and later
commenced an entirely new business,
it will not be right to say that losses incurred in connexion with the earlier
business are incurred
in gaining or producing the assessable income of the
later business or are necessarily incurred in carrying on that business. (at
p193)
8. The question whether the business carried on by the appellant since about
3rd June 1970 is the same as that which it carried
on before 2nd December 1968
is one of fact. It is a question with which the case stated does not deal
fully or directly. It does
appear that after 3rd June 1970 the appellant
entered into transactions of the same general nature - namely, hire-purchase
and money-lending
transactions - as those that had been carried on before its
activities ceased on 2nd December 1968. However, the appellant was then
trading under a different name and had a different place of business. There
was a complete change in the shareholding so that the
appellant was under
completely different control. The case does not state that the later
transactions had any connexion with the
earlier ones and in particular it does
not reveal whether it was still true that the appellant made most of its
hire-purchase agreements
with customers of a particular group of companies
which manufactured or dealt in small domestic appliances. The case does not
state
whether, in other respects, the appellant's manner of trading was the
same as, or different from, that of the earlier period. The
burden of proving
the facts necessary to establish that the assessment was excessive lies on the
appellant - s. 190 (b) of the Act.
In my judgment that burden has not been
discharged. The facts stated in the case do not satisfy me that the appellant,
after 3rd
June 1970, resumed its former business; on the contrary, the
material so far as it goes suggests that it commenced a completely new
business. The appellant has therefore not shown that the losses are deductible
within s. 51. I should add that the fact that during
the income years in
question collections of debts incurred in earlier years were made by the
special manager as agent for the appellant
is irrelevant to the question
arising under s. 51; once the debts were collected the appellant had no
beneficial interest in them
and the fact that the collections were made under
the scheme did not mean that the appellant was still carrying on its former
business.
(at p194)
8. In my opinion the questions asked in the case stated should be answered as
follows:
(a) Yes, to deductions under s. 63 of the Income Tax Assessment Act 1936, as
amended.
(b) Yes, to a deduction of $76,296 in the year ending 30th June 1970 and of
$765,367 in the year ending 30th June 1971.
(c) Yes, to a deduction of $38,620 in the year ending 30th June 1970 and of
$90,861 in the year ending 30th June 1971. (at p194)
MASON J. I am in agreement with the reasons which have been given by the
Chief Justice and Gibbs J. for the conclusion that the
compromise or
arrangement did not operate as an immediate equitable assignment of the debts
owing to the appellant when the compromise
or arrangement was entered into. It
then follows that the debts uncollected by the special manager were debts of
the appellant capable
of being written off as bad debts so as to become
allowable deductions in accordance with the provisions of s. 63 of the Income
Tax Assessment Act (Cth), as amended. (at p195)
2. Debts constituting money lent by the appellant in the ordinary course of
its money-lending business are allowable deductions
under s. 63 (1) (b). So
much of the debts due by hirers under hire-purchase agreements as represent
terms charges which have been brought to
account as assessable income are
allowable deductions under s. 63 (1) (a). (at p195)
3. The appellant conceded that so much of the debts owing by hirers as have
not been brought to account as assessable income cannot
fall within s. 63.
However, the appellant claimed that these debts, viz. outstanding terms
charges not brought to account as assessable income, fall
within s. 51 (1) as
losses "incurred in gaining or producing the assessable income" or
"necessarily incurred in carrying on a business
for the purpose of gaining or
producing such income". (at p195)
4. That the relevant amounts were losses incurred at the time when they were
written off is not in question. What is in issue is
whether they were losses
which answered either one of the two statutory descriptions contained in s. 51
(1). That the losses related
to the earning of income in antecedent years, and
not to the earning of income in the year in which the losses were incurred, is
not a disqualifying circumstance, as previous decisions of this Court have
established - see Ronpibon Tin N.L. v. Federal Commissioner
of Taxation [1949] HCA 15; (1949)
78 CLR 47 , and the cases there referred to. (at p195)
5. The words "losses and outgoings actually incurred in gaining or producing
the assessable income", as they appear in the first
alternative in s. 51 (1),
were taken from s. 23 (1) (a) of the Income Tax Assessment Act 1922-1934
(Cth). The presence of the definite
article before the words "assessable
income" has presented a problem of interpretation in the existing section and
in its progenitor.
The question is whether the expression "the assessable
income" refers to the assessable income of the taxpayer in the particular
year
in which the expenditure is incurred or the assessable income of the taxpayer
generally without regard to division into accounting
periods. In Amalgamated
Zinc (De Bavay's) Ltd. v. Federal Commissioner of Taxation [1935] HCA 81; (1935) 54 CLR 295 ,
the Court
considered that
the expression should be read as referring to
assessable income of the year in which
the expenditure was incurred,
though
the Court
qualified the narrow effect of this interpretation by observing that
the words "incurred
in gaining or producing"
should be understood
as "in the
course of gaining or producing". On this view Latham C.J. said that an
expenditure
designed to produce
income in a past
or future year was deductible
where it was "of such a character that, in a continuing business,
it must be
met from
time to time
as a part of the process of gaining assessable income"
(1935) 54 CLR, at pp 303-304 . See also Dixon
J. (1935) 54 CLR,
at p 309 .
This approach derived, not from the language of the subsection, but from what
was said in Ward &
Co. Ltd. v. Commissioner
of Taxes
(1923) AC 145, at p 148 ,
in connexion with a differently worded provision in the Land and Income
Tax
Act, 1916 (N.Z.) and
its application
to an expenditure incurred so as to
enable the taxpayer to continue to carry on business,
not so as to enable it
to earn income in
a particular year. (at p196)
6. When the Court was subsequently called upon to consider the similar
question of interpretation which arises under the provisions
of s. 51 (1) in
the Ronpibon Case it indicated that a different view might be taken of the
provisions in their new setting. Latham
C.J., Rich, Dixon, McTiernan and Webb
JJ. there said of the second alternative under s. 51 (1) (1949) 78 CLR, at p
56 :
"The word 'business' is defined by s. 6 (1) to includeThe passage indicates that the question of construction is not foreclosed by De Bavay's Case [1935] HCA 81; (1935) 54 CLR 295 and that this Court is at liberty to reach its own conclusion unfettered by what was said in De Bavay's Case. Support for this view is in my opinion supplied by the observations of Dixon C.J. in Commissioner of Taxation v. Finn [1961] HCA 61; (1961) 106 CLR 60, at p 68 , where his Honour said: "The better view, however, is that s. 51 as now drawn does not in either limb require a rigid restriction to the gaining or production of assessable income of the current year." (at p196)
profession, trade, employment, vocation or calling, but not occupation
as an employee. The alternative in s. 51 (1) therefore covers a
wide description of activities. But in actual working it can add
but little to the operation of the leading words, 'losses or
outgoings to the extent to which they are incurred in gaining or
producing the assessable income'. No doubt the expression 'in
carrying on a business for the purpose of gaining or producing'
lays down a test that is different from that implied by the words
'in gaining or producing'. But these latter words have a very
wide operation and will cover almost all the ground occupied by
the alternative. The words 'such income' mean 'income of that
description or kind' and perhaps they should be understood to
refer not to the assessable income of the accounting period but
to assessable income generally. If they were so interpreted, they
would cover a case where the business had not yet produced or
had failed to produce assessable income and the alternative
would then itself suffice to authorize the deduction of a loss
made in a distinct business."
7. Looking at the question de novo the case for saying that "the assessable
income" in s. 51 (1) means assessable income of the
taxpayer generally without
regard to division into accounting periods is to my mind irresistible. There
is every reason for thinking
that the definite article was used so as to
designate the income of the taxpayer generally rather than the income of the
taxpayer
in the year in question. It is inconceivable that Parliament intended
to confine deductions to losses and outgoings incurred in connexion
with the
production of income in the year in question and to exclude losses and
outgoings incurred in connexion with the production
of income in preceding or
succeeding years. True it is that the expression "in gaining or producing" as
it applies to assessable
income may allow some expansion in the relationship
which it would otherwise prescribe between the loss or outgoing and the
production
of income in the year in which the loss or outgoing was incurred,
but the expanded relationship thereby suggested is hinged upon
the notion that
the taxpayer is conducting a continuing business, a concept which finds no
expression in the first limb of s. 51
(1) for the ascertainment of the
allowance of a deduction. The preferable course, so it seems to me, is to read
the reference to
assessable income in the first limb of s. 51 (1) as a
reference to the assessable income of the taxpayer generally. (at p197)
8. This conclusion is not an answer to all the problems of construction
presented by the subsection. In the Ronpibon Case [1949]
HCA 15; (1949)
78 CLR 47 the Court
suggested in the passage to which I have already referred that the second limb
may have a slightly
wider
operation
than the first limb and that it may
authorize the deduction of losses incurred in a distinct business. At first
glance
it may be
thought that these observations overlook the possible
limitations inherent in the words "incurred in carrying on a business
for the
purpose of gaining or producing such income", viz. assessable income
generally. It may be argued that if the taxpayer has
ceased
to carry on a
particular business, a loss subsequently sustained in relation to that
business cannot be described accurately
as a
loss incurred in carrying on that
business, or at any rate one incurred in carrying it on for the purpose of
gaining or producing
assessable income. But the soundness of the argument
depends on what is meant by "incurred". A loss constituted by the writing off
of a bad debt is no doubt incurred, in the sense that it is sustained, at the
time when the debt is written off, and that may occur
in a given case after
the taxpayer has ceased to carry on as a going concern the business in which
the debt was created. Yet even
in such a case it may be correct to speak of
the loss as having been incurred in the carrying on of the business. This is
because
the occasion for the loss is to be found in a transaction entered into
in the carrying on of the business for the purpose of producing
assessable
income, that is, in the agreement by which the debt was created. Because the
loss had its origin in such a transaction
the loss may be said to be one which
was incurred in the carrying on of the business for the purpose of producing
assessable income,
notwithstanding that its true character as a loss is not
finally ascertained until the debt is written off. (at p198)
9. What I have said is, I think, in accord with the observations made with
respect to s. 51 (1) in the later cases. Thus in the
Ronpibon Case (1949) 78
CLR, at p 57 the Court stated that "to come within the initial part of the
subsection it is both sufficient
and necessary that the occasion of the loss
or outgoing should be found in whatever is productive of the assessable
income". So also
it may be said that it is enough to satisfy the second part
of the subsection that the occasion of the loss or outgoing is to be
found in
the carrying on of a business for the production of assessable income. In my
opinion, therefore, the outstanding terms charges
not brought to account as
assessable income fall certainly within the second limb of s. 51 (1); it may
be that they fall within the
first limb but this is not a question which needs
to be pursued. (at p198)
10. If this conclusion involves a departure from the literal meaning of the
words used it is to be justified by reference to the
context and to the
unlikely and arbitrary consequence which would flow from the adoption of a
literal interpretation. That a loss
having its origin in the course of
carrying on a business for profit should only be deductible whilst the
business is still in operation,
though the loss may not be ascertained until a
later date, seems to me to be a strange result; so strange indeed that an
intention
to bring it about should not be imputed to the legislature when the
statute is susceptible to a sensible alternative interpretation.
(at p198)
11. On the view which I have thus far expressed it is unnecessary to decide
whether the business carried on when the debts were
written off was the same
as the business which was carried on when the relevant hire-purchase
agreements were entered into. However,
having considered the question, I
should state as an additional ground of decision that on the facts recited in
the stated case I
am satisfied that the business carried on by the appellant
after its share capital was acquired by Australian Guarantee Corporation
Ltd.
was the same business as that which the appellant formerly carried on. Or to
put the matter more precisely, the facts recited
are not such as in my opinion
raise an issue whereby it may be said that the appellant has failed to
discharge the onus placed upon
it by s. 190 (b). (at p198)
12. From all that appears the appellant later conducted the business of a
money-lender and hire-purchase financier, that being the
business which it had
conducted before it entered into the compromise or arrangement. There is no
indication that the character of
the business changed in any respect. That
there was a change in the personality of the shareholders and of the clients
with whom
the appellant did business is immaterial to the question whether a
different business came into existence, so long as the character
of the
business remained unaltered. (at p199)
13. Nor can it be said that on the facts one could conclude that a new and
distinct business came into existence in place of the
business initially
carried on, though having the same character as the latter. It may be
acknowledged that there was a cessation
in the day-to-day business activities
of the appellant when it encountered financial difficulties, but as I read the
facts the cessation
was intended to be temporary, not permanent. The
compromise or arrangement was not designed to terminate the appellant's
business
but to enable it to continue on the footing of the moratorium thereby
provided, for it contemplated that the appellant would continue
to trade. (at
p199)
14. In the result I agree that the questions should be answered in the manner
proposed by the Chief Justice. (at p199)
ORDER
Order that the questions in the stated case be answered as follows:(a) Was the appellant entitled in the years of income ended 30th June 1970 and 30th June 1971 to deductions under s. 51 or under s. 63 of the Income Tax Assessment Act 1936 as amended in respect of any part of the amounts of $243,838.00 and $1,126,117.00 referred to in pars 50 and 58 above.
Respondent to pay costs of this appeal.l 160720
AustLII:
Copyright Policy
|
Disclaimers
|
Privacy Policy
|
Feedback
URL: http://www.austlii.edu.au/au/cases/cth/HCA/1975/7.html