The Herald and Weekly Times Ltd v Federal Commissioner of Taxation
(1932-33) 48 CLR 1136 ALJ 314
(Judgment by: Starke J)
Between: The Herald and Weekly Times Ltd
And: Federal Commissioner of Taxation
Judges:
Gavan Duffy CJ
Dixon J
Rich J
Starke JEvatt J
McTiernan J
Judgment date: 30 September 1932
MELBOURNE
Judgment by:
Starke J
The appellant is the proprietor and publisher of several newspapers, and claims to deduct from its assessable income for the year 1929-1930 certain disbursements representing moneys paid by way of compensation, either before or after judgment, for damages in respect of defamatory matter published in its papers, and amounts incurred by way of costs in contesting the claims of the persons defamed and in obtaining advice in regard thereto. Mann J. refused to allow the deductions claimed: hence this appeal.
The question turns upon the following sections of the Income Tax Assessment Acts 1992-1929:- Sec.23:
- "(1)
- In calculating the taxable income of a taxpayer the total assessable income derived by the taxpayer from all sources in Australia shall be taken as a basis, and from it there shall be deducted-
- (a)
- 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."
The disbursements here claimed as deductions were, no doubt, an expense of the business, and might properly find their place in the profit and loss account of the Company. And possibly they might be deducted under English Income Tax Act 1918 as moneys wholly and exclusively laid out for the purposes of trade. (But see Strong & Co. v. Woodifield; [F7] Smith v. Lion Brewery Ltd.; [F8] Inland Revenue Commissioners v. Von Glehn.) [F9] But that is not decisive, for the question under the Australian Act is: Were the disbursements under consideration incurred in gaining or producing the assessable income? Any deduction is prohibited unless the disbursement is wholly and exclusively laid out or expended for the production of assessable income (Ward & Co. v. Commissioner of Taxes). [F10] "It is not enough that the disbursement is made in the course of, or arises out of, or is connected with, the trade, or is made out of the profits of the" business. (Cf. Strong & Co. v. Woodifield.) [F11] It must be incurred in gaining or producing the assessable income; it must be wholly and exclusively laid out or expended for the production of assessable income. No doubt, if the whole and exclusive purpose of the disbursement were to gain or produce assessable income, then the mere fact that to some extent the disbursement enures for other purposes would not in law defeat the right to the deduction (Usher's Wiltshire Brewery Ltd. v. Bruce). [F12] Beyond this, the question whether disbursements have been incurred in gaining or producing the assessable income, or wholly and exclusively laid out or expended for the production of assessable income, is a question of fact. The expenditure in the present case was not for the production of income, but was rather a depletion of income: it was incurred to pay compensation for civil wrongs that had been committed, and costs merely incident to it. The case of the Federal Commissioner of Taxation v. Gordon [F13] is not in point.
There is disbursement was made for services rendered in connection with the carrying on of the business of a grazier. In my opinion, Mann J. properly resolved the question of fact against the appellant and this appeal should be dismissed.