Case H35

Judges: JL Burke Ch

RE O'Neill M
CF Fairleigh QC

Court:
No. 1 Board of Review

Judgment date: 31 August 1976.

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R. E. O'Neill (Member): Evidence such as that quoted in para. 19 of the Chairman's reasons leads me to conclude that when the taxpayer put money into shares in M Pty. Ltd. he was not entering upon, in terms of sec. 52, ``the carrying on or carrying out of any undertaking or scheme, the profit (if any) from which undertaking or scheme would have been included in his assessable income''. Although the adjective ``profit-making'' does not there appear before ``undertaking or scheme'', it does so appear twice in the proviso to sec. 52. Furthermore, sec. 52 complements sec. 26(a) which includes in assessable income profit arising ``from the carrying on or carrying out of any profit-making undertaking or scheme''. Hence, in sec. 52 ``undertaking or scheme'' must be read as having the same sense as ``profit-making undertaking or scheme'' has in the second limb of sec. 26(a). In this view a loss is not deductible under sec. 52 unless the undertaking or scheme is one carried on or carried out by the taxpayer with the purpose of making a profit as is the case under sec. 26(a):
XCO Pty. Ltd. v. F.C. of T. 71 ATC 4152 at p. 4155; (1971) 124 C.L.R. 343 ;
Loxton v. F.C. of T. 73 ATC 4001 at p. 4006 ;
George W. Cheverton Pty. Ltd. v. F.C. of T. (1962) 12 A.T.D. 461 at pp. 469-470 . It must be the taxpayer's purpose to realize profit. As I understand the evidence that was not his sole or dominant purpose - rather did he hope that the company would succeed when he would continue to be a significant shareholder and director of its affairs either as a public company or as a large proprietary company. Accordingly I would uphold the Commissioner's decision on the objection.