Blockey v. Federal Commissioner of Taxation
31 CLR 503(Judgment by: Isaacs J)
Blockey v. Federal Commissioner of Taxation
Court:
Judges:
Knox CJ
Isaacs JHiggins J
Rich J
Starke J
Subject References:
Taxation and revenue
Income tax
Profits on speculation in wheat scrip
Income from personal exertion
Legislative References:
Income Tax Assessment Act 1915 (Cth) - Section 3
Judgment date: 12 March 1923;
MELBOURNE
Judgment by:
Isaacs J
ISSACS J. I agree that the question should be answered in the affirmative. The relevant principle is that stated in the Scottish case, Californian Copper Syndicate Ltd v Harris [F3] , affirmed by the Privy Council in the Melbourne Trust Case [F4] . The proper test here, based on the Scottish cases, is, I think, this: Is the gain made an enlargement of capital arising from the mere realization of property, or is it a gain made in business operations in the course of carrying on a scheme for profit making? I cannot entertain any doubt it was the latter. The facts as stated disclose a definite and interconnected scheme for profit making by buying and selling through brokers Victorian and/or New South Wales 1917-1918 wheat scrip. The buying portion of the scheme was to continue until a considerable amount of capital was employed, namely, PD5,000, at various times on instructions given from time to time. No time limit was fixed; that fell to be determined by final instructions. In fact the purchasing portion of the scheme lasted for two months and reached PD5,238 14s. 2d. Then instructions were given to brokers to pursue the selling portion of the scheme, which lasted a little over a month and resulted in a net receipt of PD8,657 2s. 4d. The net result of the whole scheme was a profit of PD3,418 8s. 2d. That profit is, therefore, not the product of a single instance or of two or more unconnected instances. It is not the case of a man buying land or goods to keep or use, and then finding it desirable or advantageous to sell.
It is the case predicated by Lord Loreburn L.C. and by Lord Atkinson in Kirkwood v Gadd [F5] . The Lord Chancellor said:"What is carrying on business? It imports a series or repetition of acts Lord Atkinson, referring to the judgment of Brett L.J. in Smith v Anderson [F6] , said that "the words `carries on' must be held to imply a repetition of acts, the sum of which constitutes the `business.' " That case and another, In re Griffin; Ex parte Board of Trade [F7] , quoted in the Melbourne Trust Case [F8] , show clearly to my mind that the present case must be regarded as one in which the taxpayer was, with his co-adventurers, carrying on a business. It is true the business was in a measure limited in point of capital, and was not intended to endure indefinitely; but neither of those circumstances is inconsistent with carrying on a business. The all-important fact is that there were a series of transactions connected by a common purpose, that of dealing in wheat scrip, and consisting of all the characteristic operations found in a business of that nature, buying and selling; the scrip itself being treated, not as an investment, but as stock-in-trade, a mere medium for successfully carrying through the profit-making scheme. The capital invested was risked, and was returned, with the profit it had earned. I have no doubt the Commissioner is right and the question should be answered accordingly.
I will add a word to prevent possible misconception:What I have said has reference to the facts of this particular case, in which the only claim made by the Commissioner is on the basis of income derived from personal exertion. The appellant resisted on the ground that the adventure was not a "business" within the meaning of that term as found in the definition of "income from personal exertion." I have expressed the opinion that it was. But nothing I have said must be taken as indicating that, if the adventure had not been a "business" and the Commissioner had assessed the profits as income from property, he would have failed. Whatever is "income" is income from property, unless it falls within the statutory definition of "income from personal exertion." A mere realization of property though producing profit does not, as I have said, produce income. It is a mere enlargement of capital. But if a man, even in a single instance, risks capital in a commercial venture-say, in the purchase of a cargo of sugar or a flock of sheep for the purpose of profit making by resale and makes profit accordingly, I do not for a moment mean to say he has not received "income" which is taxable. I intimated during the argument that this was possible; and I leave it open.