Smith v Federal Commissioner of Taxation
48 CLR 178(Judgment by: GAVAN DUFFY CJ AND EVATT J)
Smith
v Federal Commissioner of Taxation
Judges:
Gavan Duffy CJ and Evatt JRich J
Starke J, Dixon J and McTiernan J
Subject References:
Taxation and revenue
Income tax
Resumption of land
Compulsory sale
Profit distributed as dividend
Dividend not assessable income
Subsequent amending legislation
Legislative References:
Income Tax Assessment Act 1922 (Cth) No 37 - s 16(b)(i)
Income Tax Assessment Act 1930 (Cth) No 50 - s 6(b)
City of Brisbane Improvement Act 1916 (Qld) (7 Geo V No 24) - ss 3, 7, 8, 17
Judgment date: 18 August 1932
Sydney
Judgment by:
GAVAN DUFFY CJ AND EVATT J
Certain lands of the taxpayer became the property of the City of Brisbane under and by virtue of the City of Brisbane Improvement Act of 1916. By s. 13 the Council was empowered "without complying with the Act," to "enter into an agreement to take" any land required. But action was not taken under s. 13, and the course adopted was to "take" the land under s. 3 by "notice of resumption" published in the Gazette.
The question which now arises is whether the transaction mentioned was a "sale of assets" within the meaning of the third proviso to s. 16 (b)(i.) of the Income Tax Assessment Act 1922-1927. The proviso enacts that when a company dividend or bonus is paid "wholly and exclusively out of the profits arising from the sale of assets which were not acquired for the purpose of resale at a profit a member of shareholder shall not be liable to tax on that dividend or bonus."
The general scheme of the proviso is not in doubt. The assets of a company are divided into assets acquired "for the purpose of resale" and those not so acquired, that is, "fixed" assets. Profit may arise from the sale by the company of assets belonging to the second class, and, if profit does arise, it is not taxable as dividend in the hands of the shareholder.
We do not think that the expression "sale" in the proviso is sufficiently elastic to include the compulsory taking of the appellant's land by the Council. There was no agreement between the parties prior to the taking. The property became vested in the Council by force of the publication of the notice, not by force of any conveyance or transfer. After Gazette notification, the appellant retained no interest whatever in the land, and his sole right was to have compensation paid to him. The subsequent arrangement between the parties as to the amount of that compensation was directed solely to avert the litigation which otherwise would have taken place. For a "sale," there must be a seller or vendor, a purchaser or a buyer, and a transfer of the things-for a price. These predominant features are absent from the transaction here, where there was never a vendor, never a purchaser, and never a price. We are not impressed by the consideration that the resumption of lands under some State laws the true intent of which is to compel a person to sell land for a price, may be within the proviso. That is not the case here.
When, in August 1930, the Legislature amended the Income Tax Assessment Act, it altered the proviso under consideration and used the disjunctive phrase "profits arising from the sale, or compulsory resumption for public purposes, of assets"; but made the alteration applicable only to assessments in respect of financial years, commencing with the financial year 1930-1931. This amendment can, we think, be looked at, and it shows conclusively the Legislature thought that a very clear distinction existed between a sale and a compulsory resumption of land, and that the original proviso did not apply to compulsory resumptions. The form of the amending legislation is inexplicable on any other hypothesis.
For these reasons the appeal should be dismissed.