Case H32

Judges: FE Dubout Ch
N Dempsey M

P Gerber M

Court:
No. 3 Board of Review

Judgment date: 27 July 1976.

Dr. P. Gerber (Member): The issue in this appeal involves the question whether panty hose, allegedly torn and replaced due to the exigencies of the employment, constitute an allowable deduction as a loss or outgoing incurred for the purpose of gaining or producing assessable income. A large number of cases were cited in argument.

2. If this problem were to be solved by the irrefutable logic of Boolean algebra rather than Board-made jurisprudence, one would be tempted to say that sec. 51 is designed and so worded as to provide some relief for garments damaged due to the hazards of employment, just as remedial legislation in another field provides for compensation for personal injury arising out of or in the course of employment.

3. However, I am compelled by authority to accept that an expenditure incurred in gaining or producing assessable income requires something more than a mere temporal connection with the gaining of assessable income. As the Chairman has pointed out in his decision in this case,
Lodge v. F.C. of T. 72 ATC 4174 ; (1972) 128 C.L.R. 171 ; (1972) 46 A.L.J.R. 575 , emphasizes that such a temporal view of sec. 51(1) has been pre-empted by judicial interpretations of the word ``in'' in the principal parts of the subsection. One can only wonder that ``modern law seems unable to adopt tests of liability that consist in simple external occurrences, plain and objective; the law persistently-turns to criteria involving causation.'' (per Dixon J.:
Hetherington v. Amalgamated Collieries of W.A. (1939) 62 C.L.R. 317 , 332 .)

4. For myself, I am unable to divine a conceptual distinction between tests of liability which depend, on the one hand, on proof that an injury is sustained in the course of employment, and a loss incurred in gaining assessable income. When applied to the former, Dixon C.J. stated in
Kavanagh v. The Commonwealth (1960) 103 C.L.R. 557 : ``Had it not been for the employment the injury by accident would not or might not have been sustained, or negatively by saying that the injury by accident must not be one which occurred independently of the employment and its incidents.'' (at p. 557); yet when analysing the characteristics of a loss alleged to have been incurred in gaining assessable income, an element of causation is introduced which requires an apparent nexus between the loss and the necessary performance of the duties of the employment. So be it. One can only marvel that so simple a preposition, defining a position within the limits of space and time should, on closer analysis, have concealed some attributes of causation.


ATC 284

5. Unassisted by authority, I would have thought that a taxpayer who: -

  • (i) is compelled to wear stockings;
  • (ii) damages them due to a continuing hazard; and
  • (iii) incurs the cost of replacement;

satisfies all the conditions of sec. 51 in that the cost of replacement is an expenditure incurred in gaining or producing assessable income, being incidental and relevant to that end. To call such disbursement in these circumstances an expenditure of a ``private'' nature seems to me to introduce an artificiality into the interpretation of sec. 51 not unlike parsing and analysing poetry. Thus to dismember, say, an ode by Keats may result in an academic disquisition on grammar, but it has as little relevance to poetry as the particular analysis of sec. 51, resorted to in the ``clothing'' cases, bears to the overall purpose for which the section was enacted. I may add that I find little assistance in such ``tests'' as the ``necessary and peculiar principle'', or the ``abnormal expenditure on conventional clothing'' (whatever conventional clothing may be in this day and age), by which Boards have, at times, sought to introduce some vague principles of equity into a taxing statute. If there is a difference between stockings, regularly laddered at work, and a suit, worn by a plain clothes detective, which was held to be an allowable deduction on proof that such suit had a reduced life expectancy when exposed to the underworld, then such difference escapes me; cf. Case P62,
14 T.B.R.D. 278 and Case H2,
76 ATC 7 .

6. On the facts of this case, however, I am spared the necessity of attempting to reconcile the irreconcilable, since on the evidence, I am not satisfied that the expenditure was incurred in the manner described.

7. The taxpayer, a typist-clerk, served Notice of Objection on the 5th December, 1974 against the refusal of the Commissioner to deduct from her taxable income for the year ended 30th June, 1970

``an amount of not less than $51 in respect of replacement of stockings claimed in Item 42 of the return lodged, is an allowable deduction by virtue of the provisions of sec. 51(1) of the Income Tax Assessment Act.''

8. Attached to her return, under Item 42, ``Other Deductions'' appear the following:

``Stockings damaged and replaced:

2 pairs per week at 99 ¢ each =99 ¢ x 2 x 52 = $102.96

½ damaged at work in contact with filing cabinets, desks and other furniture = $51.''

9. It will be noted that taxpayer claimed in her return that she damaged two pairs of stockings per week. This return was signed by the taxpayer on the 29th October, 1974.

10. At the hearing of the appeal in June, 1976, i.e. almost two years later, taxpayer deposed that she now ladders five pairs of stockings per week, three pairs at work and two travelling to and from work. She persisted in her assertion that one pair of stockings was regularly damaged on filing cabinets and other office equipment.

11. Whether this increase in laddered stockings in the intervening years was due to the flimsy nature of the garment or the evidence I am unable to determine.

12. Three coloured photos were exhibited, depicting a standard desk, a chair of no great pretensions, and five humdrum looking steel cabinets, whose very humdrumness could not be enhanced, notwithstanding the excellence of the photography. For good measure, taxpayer herself was depicted in one of the exhibits, apparently busily engaged at work. In short, these photos depicted a scene which is daily enacted all over the country in countless offices containing desks and filing cabinets.

13. During cross-examination of the taxpayer, the claim for 52 pairs of stockings was reduced by 6 pairs, since taxpayer had to concede that during the relevant tax year, she took six weeks off - two for her honeymoon and four for her annual vacation. The concept that, during the remaining forty-six weeks, taxpayer laddered with metronomic regularity, one pair of stockings per week through contact with filing cabinets, is one I am quite unable to accept. Taxpayer struck me as a competent, conscientious and self-reliant young lady, well able to profit from the maxim ``once bitten, twice shy''.

14. Whilst I am satisfied that taxpayer did not deliberately exaggerate her claim, on the whole of the evidence, and in particular, in view of the inconsistency between the claim as set out in her return, and her oral testimony, I


ATC 285

cannot be satisfied that the stockings claimed to have been laddered, were laddered in the manner described. To ladder forty-six pairs of stockings in one year in the same manner is consistent only with carelessness. Whilst the ordinary rules of mitigation of damages may not have their counterpart in the Income Tax Assessment Act, a taxpayer's only chance of success on such a claim as the present, as the law now stands, is if it can be shown that the loss, claimed as a deduction, is one peculiarly, directly and exclusively attributable to the employment. I cannot attribute such a hazard to the filing cabinets or the office furniture as depicted in the exhibits and described in evidence, or to the occupation of a typist-clerk.

15. For the reasons set out above, I would uphold the Commissioner's decision on the objection and confirm the assessment.

Claim disallowed


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