Ravenshoe Tin Dredging Ltd v Federal Commissioner of Taxation
(1966) 116 CLR 8140 ALJR 76
(Judgment by: Menzies)
RAVENSHOE TIN DREDGING LTD.
v FEDERAL COMMISSIONER OF TAXATION
Judge:
Taylor J.
Judgment date: 28 April 1965
Judgment by:
Menzies
MENZIES J. The facts to which s. 23A (1) and s. 80 of the Income Tax and Social Services Contribution Assessment Act 1936-1961 (Cth) have here to be applied are set out in the judgment of Taylor J., from which this appeal has been brought, and in the judgment of Owen J., which I have had the advantage of reading. I will not repeat them and I propose to do no more than state shortly my reason for thinking that, upon those facts, the taxpayer is entitled to succeed. (at p92)
The assessment in question depended upon treating the taxpayer's losses of previous years as deductions relating to the taxpayer's income of the year of tax. With this I cannot agree. It seems to me that the problem to which s. 23A (1) gives rise is not unlike that which has often arisen under s. 50 of the Act and, for the requisite relationship to exist between the income and the deduction, there must be some specific connexion between the two amounts in question. It is not enough that one is assessable income and the other is an allowable deduction. I have not been able to find any sufficient connexion here between the past losses and the current income, notwithstanding that it may be assumed that what the taxpayer spent in past years prepared the way for the making of profits in later years, including the year of tax. Past losses, however, which arose simply because receipts did not match expenditure, did not themselves contribute to present profits. (at p93)
Because I think that the assessment was accordingly made upon a wrong basis, I am of the opinion that the appeal should be allowed and the assessment varied by increasing the amount of the income exemption under s. 23A of the Act from 6,568 pounds to 34,974 pounds, in which case the taxable income should be increased from 26,271 pounds to 32,839 pounds. (at p93)