Federal Commissioner of Taxation v. Gordon

43 CLR 456

(Judgment by: Starke J)

Federal Commissioner of Taxation v. Gordon

Court:
HIGH COURT OF AUSTRALIA

Judges: Isaacs CJ
Rich J

Starke J

Subject References:
Taxation and revenue
Income tax
Deduction
Expenditure for production of assessable income

Legislative References:
Income Tax Assessment Act 1922 (Cth) No 37 - ss 23(1)(a); ss 25(e)

Judgment date: 20 November 1929

SYDNEY


Judgment by:
Starke J

STARKE J. The Income Tax Assessment Act 1922-1927 allows a deduction of "all losses and outgoings (including commission, discount, travelling expenses, interest and expenses, and not being in the nature of losses and outgoings of capital) actually incurred in gaining or producing the assessable income" (s. 23 (1) (a)). Section 25 (e) provides that a deduction shall not be made in respect of any "money not wholly and exclusively laid out or expended for the production of assessable income."

The taxpayer is a member of the Graziers' Association of New South Wales, and pays a yearly contribution to the funds of that Association on a scale prescribed by its rules. His contribution in the financial year 1926-1927 amounted to PD15, and he claimed this sum as a deduction from his assessable income for the financial year 1927-1928. The Commissioner disallowed the claim, but my brother Dixon, on appeal, allowed it, and from his decision this appeal has been brought.

The objects of the Graziers' Association are set forth in its rules, and, substantially, they are the protection of its members and the advancement of their interests. It should be stated that the Association has a political fund, which is kept separate and apart from its other funds, and to which members are under no obligation to contribute. So far as the matter is one of law, money expended, not of necessity but voluntarily, and on the grounds of commercial expediency, and in order to protect or facilitate the carrying on of a business may be incurred in gaining or producing the income arising from that business (see British Insulated and Helsby Cables Ltd v Atherton [F2] ; Usher's Wiltshire Brewery Ltd v Bruce [F3] ). And my brother Dixon has found that the contribution in question in this appeal was in fact incurred in gaining or producing the assessable income of the taxpayer. I see no reason for disturbing that conclusion of fact, and concur in it.

But then it is argued that the contribution was not "wholly and exclusively laid out or expended for the production of assessable income," as the Association has such wide powers that the contributions of members might lawfully be applied to very different purposes than those the taxpayer had in view. The question is really one of fact. The money was paid to secure to the taxpayer's business the benefits which flowed from membership of the Association. It was from his business that his assessable income was derived, and the contribution was made to protect his interest in and his income from this business, and for no other purpose. My brother Dixon concluded that money so expended was wholly and exclusively laid out or expended for the production of the taxpayer's assessable income. Again, I see no reason for disturbing his finding, and concur in it.

The appeal should be dismissed.

Above, 450

(1926) A.C., at pp. 211-212

(1915) A.C., at pp. 469-470