The Herald and Weekly Times Ltd v Federal Commissioner of Taxation
(1932-33) 48 CLR 1136 ALJ 314
(Judgment by: Rich J)
Between: The Herald and Weekly Times Ltd
And: Federal Commissioner of Taxation
Judges:
Gavan Duffy CJ
Dixon J
Rich JStarke J
Evatt J
McTiernan J
Judgment date: 30 September 1932
MELBOURNE
Judgment by:
Rich J
This is an appeal to this Court in its appellate jurisdiction, under sub-sec. 10 of sec. 51A of the Income Tax Assessment Act 1922- 1930, from a decision of Mann J., who disallowed as deductions certain disbursements made during the financial year ending 30th June 1930 arising out of the conduct of the appellant's business as the proprietor and publisher of an evening newspaper. In the judgment under appeal the disbursements are described as representing sums paid by way of compensation, either before or after judgment, to persons claiming damages in respect of libels said to have been published in the appellant's newspaper, and some other sums representing the costs of contesting those claims or of obtaining advice in relation to the best course to be followed with regard to claims of a similar kind. The Commissioner disallowed these sums as deductions upon the ground that they were not wholly and exclusively laid out or expended for the production of assessable income, and his Honor upheld that decision. The question whether the sums claimed should be deducted in ascertaining the appellant's taxable income depends upon sec. 23(1)(a) and sec. 25(e) of the Income Tax Assessment Act 1922-1929. The evidence in the case and the findings of Mann J. lead to the conclusion that the expenditure in question is practically inevitable in the publication of an evening newspaper, but he considered it was not productive expenditure. Matter set up in a newspaper is published for the purpose of increasing its circulation and attracting advertisements. Income is gained or produced and liability is sometimes incurred. Publication is at once the source of income and the cause of liability. Payments subsequently made by way of compensation in respect of this liability or for costs to escape such liability relate back to publication.
As publication is the common source of income and liability, the necessary connection between the carrying on of the business of the newspaper and the liability which causes the exp enditure is complete. In my opinion the disbursements in question fall within sec. 23(1)(a) and are not prohibited by sec. 25(e).
The appeal should be allowed.