Broken Hill Theatres Pty Ltd v Federal Commissioner of Taxation
(1952) 85 CLR 423(Judgment by: Webb J)
Between: Broken Hill Theatres Pty Ltd
And: Federal Commissioner of Taxation
Judges:
Williams J
Dixon CJ
McTiernan J
Webb JFullagar J
Kitto J
Legislative References:
Income Tax (Cth.) - The Act
Judgment date: 6 July 1951
Judgment by:
Webb J
I would dismiss this appeal. (at p435)
I am unable to see why heavy legal expenses incurred in resisting the licensing of a new theatre which, if it came into existence, would impair or destroy the business of an existing theatre, should be capital expenditure in one town and revenue expenditure in another. I think that the propensity of persons in a town to seek such licences cannot turn what would otherwise be a capital outlay into revenue expenditure in that town, and that evidence of such propensity is inadmissible for that purpose. But if it is admissible then it reveals in this case that applications for new licences repeatedly failed. That is not surprising, as the refusal of a licence not only gives immunity for a year certain, but is likely to ensure immunity for a longer period, though not permanently. It is true that, say, the cost of painting business premises is usually a revenue expenditure, although such cost may be heavy and painting is required only every four or five years. Still it is so required as a matter of course. But ordinarily that is not the case with legal expenses incurred in resisting new licences. It cannot at any time be predicted with certainty that applications for new licences will be made in the near future, and that legal expenses will be incurred in resisting them, simply because there is nothing in law to prevent such applications. The provision for annual applications for licences, if desired, imposes a limit on such applications: it does not render them more likely to succeed than if they could be made at any time. (at p436)
Hallstroms Pty. Ltd. v. Federal Commissioner of Taxation (1946) 72 CLR 634 is, I think, distinguishable, as Williams J. held. The extension of the patent in that case would have been for a fixed period of years. The life of the patent, like that of a coat of paint, would be of definite duration and known in advance. But forecasts as to the probable fate of applications for theatre licences would be in the region of speculation and beyond the scope of evidence. Expenditure in preventing the extension of a patent in so far as it would tend to protect for a definite period of years the income of the business making the article formerly patented would be regarded as revenue expenditure. But expenditure in preventing a new licence for an indefinite period might properly be claimed to be for the protection of the business as a whole, and so be treated as capital expenditure. (at p436)