Case K61
Judges: HP Stevens ChCF Fairleigh QC
JR Harrowell M
Court:
No. 1 Board of Review
C.F. Fairleigh Q.C. (Member): The partnership return of the taxpayers, an architect and wife, for the year ended 30 June 1972 contained an attachment to the following effect -
``The Commissioner is advised that commencing on 21 August 1971 we demolished the then existing building on... and commenced the erection of a block of eight units.
Erection was substantially completed at the end of February 1972 at which time, because of difficulties re finance, we determined to sell five units and let the remaining three.
Tenants were obtained for units 7, 8 and 2 from, respectively, 6 March, 11 March, and 15 April 1972.
Settlements of the sales of the five units were on May 12, 16 and 26 and June 9 and 22 1972.
From 1 July 1971, all outgoings have been `capitalised'. No further depreciation has been claimed. Rents received from 1 July 1971 to demolition, $224.00 (7 weeks at $32.00) have been credited in reduction of costs, it being considered that interest paid at $27.68 per week plus rates, etc. more than offset such rental income.
ATC 594
The project was conceived and undertaken as an investment and not as a profit making undertaking or scheme.''
2. In response to the Commissioner's request the taxpayers' agents supplied information to the following effect -
``Purchase price .......... $19,000.00 Stamp duty .............. 250.35 Legal costs, etc. ....... 429.95 ---------- $19,680.30 ----------Mortgage moneys raised on the security of the property to enable settlement of the purchase were $15,000 ex T, due 11.5.1970, with interest at 9% (penalty rate 9.5%) from 11.2.1970 and $1,000 ex M, due 11.5.1970 with interest at 9.5% (9.95%) from 11.2.1970.
These two mortgages were settled in September 1970 by new mortgage loans of $10,000 ex R, due 9.3.1971 with interest at 9.5% (9.95%) payable quarterly from 9.9.1970 and $1,000 from G estate, due 25.3.1971 with interest at 9.75% (9.95%) payable quarterly from 25.9.1970 and a personal loan from the parents of the architect's wife.
Subsequently in October 1971 these last two mortgages were discharged ex fresh borrowings of $7,000 from F, due 1.10.1973 with interest at 9.5% (9.95%) payable quarterly from 1.10.1971 and $6,400 from G estate, due 22.10.1972 with interest at 9.75% (9.95%) from 22.10.1971, the security for which was provided by (the said parents) thus leaving the property free of encumbrances to permit of the borrowing of moneys for the construction of the new building. The building finance was provided by (a money-lending) company at an interest rate of 1-1/8% per month (13 ½ % per annum) and bank overdraft, it being intended to refinance the project on the completion of erection.
At 30 June 1972 the rentals of the three remaining units were - units 2 and 7 at $139.05 per month and unit 8 at $139.04 per month.
The reason for the replacement of the old building with a new one was for the anticipated enhanced investment return that the new building would produce.
The total cost of the new property was $96,927.81, inclusive of the original cost of the property.
The amounts received from the sale of the five units were as follows -
Unit No. 1 3 4 5 6 Total Sale Price 16,350.00 16,650.00 16,450.00 16,250.00 16,900.00 82,600.00 Deduct: Commission, Solicitors' Costs and Adjustments 500.23 1,288.96 594.03 656.34 659.13 3,698.69 ---------- ---------- ---------- -------- --------- --------- $15,849.77 $15,361.04 $15,855.97 $15,593.66 $16,240.87 $78,901.31 ---------- ---------- ---------- ---------- ---------- ----------The reason why five of the units were sold was the realisation by the partners that, because of the much greater capital investment than had been envisaged, they would have virtually the whole of their capital tied up in the block of eight flats and could not beneficially finance the holding of the entire block. They therefore determined to `strata plan' the block, sell five units and hold the remaining three units as an investment.''
3. The taxpayers' agents requested the Commissioner to correct his records to show the ``surplus'' on the sale of the five units as follows -
ATC 595
``Selling price of units $82,600
Less Selling Commission $3,223
Legal expenses 670 3,893
------ -------
Net amount realised on sale 78,707
Deduct Proportion of cost
5/8ths of $96,927.81 (not $60,579) 60,580
-------
Surplus $18,127
-------''
4. The issue before the Board arises from an amended assessment whereby the Commissioner included in the taxable income of each of the taxpayers an equal share of the profit of $18,127 arising from the said sales; by circumstances not presently material it resulted in an addition to the taxable income of each of $9,161.
5. The taxpayers each objected thereto on grounds referable to sec. 25(1) and to each of the limbs of sec. 26(a) of the Act and further that because of a reduction in the partnership distribution the increase in distribution should be $9,063 and not $9,161.
6. The Commissioner issued a notice of amended assessment to each of the taxpayers reducing the architect's taxable income from $17,703 to $17,605 and his wife's taxable income from $12,257 to $12,096 but otherwise he decided to disallow the objections. Those decisions have been referred to a Board for review. Although the parties have requested that the references be heard together, each reference is distinct from the other; there has not been a consolidation and each taxpayer is entitled to a separate formal order.
7. The more important distinctions between the evidence as given by the taxpayers and what was set out in documents as aforesaid are that the intention as expressed in a letter sent to several agents on 6 January 1972 was to sell four (not five) of the units; that there was not an intention to refinance the loan from the money-lender on completion of the project but an appreciation in the last few days of December 1971 (or in the first few days of January 1972) that if there was a continuation of the money-lender's loan then the income from the units would not be sufficient to meet all overheads, let alone provide a surplus to reduce the principal.
8. The taxpayers each gave evidence and called as witnesses his elder brother who was a builder who carried out the construction of the project and had had previous experience in the construction of an eight unit block; the solicitor who arranged some of the interim finance; and an accountant who was the directing mind and will of the money-lender company as well as, at various times, its accountant, and accountant for the taxpayers. I have no criticism to make of the taxpayers for not calling additional witnesses.
9. Numerous documents were tendered in evidence, and piled up they stand about one-fourth of a metre in height. The bulk of the pile is irrelevant. I do not propose to recite evidence, and I proceed to make findings of fact on the salient features -
- 21 October: The architect paid a deposit of $500 on the subject land and the receipt contains sufficient particulars to satisfy the Statute of Frauds; there is a condition of Shire Council approval for an eight unit block; and a condition that contracts in writing be exchanged.
- 12 November: The architect paid to the solicitor $2,500 as part purchase money.
- 27 November: Application made to the Shire Council for approval to develop the land by demolition of existing house (two flats) and erection of block of eight home units.
- 3 December: Consent by Shire Council to the development application.
- 18 December:
Contract for sale signed by
ATC 596
all parties. (The wife's father acted as agent/trustee for her in the contract.) I take this date (by inference) to be the date when contracts were exchanged. This is the date of acquisition for sec. 26(a) of the Act. - 18 December: The wife's father signed a declaration that he is acting on her behalf. (This disposes of any problems, as to her purpose, which might have arisen if there had been a gift to her. The sum of $3,000 was paid by the architect from a fund accumulated as the result of both husband and wife being in employment and using the equivalent of her earnings for living expenses.)
1969
- 24 April: Title to the land entered up in favour of the architect and his wife's father.
- 4 November: Application made to the Shire Council for a building permit for block of eight units.
- 25 November: Consent by the Shire Council to the application for a building permit.
1970
- 14 May: Application made to the Shire Council for a variation of the building plan.
- 28 May: Decision by Shire Council on the application for variation. (Applications for variations continued until a final approval late August 1971.)
1971
- 21 August: Demolition of existing house begins.
- 21 September: Commencement of building project.
- 22 September: $6,000 borrowed for eight months from Bank of New South Wales when funds unavailable through the solicitor.
- October: $12,000 borrowed by the architect's brother (the builder) on short terms from his bank and made available to the architect and his wife.
- November: Architect and his wife learn of her pregnancy; and so of her inability to work through the next year.
- 13 December: Mortgage signed in favour of the money-lender on initial advance of $10,000 at a time when the architect and his wife are the registered proprietors of the land.
- Mid December: $6,000 and $12,000 fully expended.
- End December: The architect concludes that the income from the eight units will be insufficient to meet outlays including interest.
1971
- 6 January: Letter to several real estate agents stating that the architect now intends to sell four of the units at prices listed. The intention is to sell some to try and reduce the borrowed money so as to reach a situation of stability where they can hold what is left. Cost then known to be more than $20,000 above original estimate of $50,000 for construction.
- End February: Project completed. The ultimate cost including land ($19,680) and including interest ($4,218) is $96,928.
- 24 March: Contracts exchanged for sale of units Nos. 1 and 3 ($16,350 and $16,650) and inferentially for three others within a few weeks.
- End April: The architect gives one month's notice to his employers of his intention to resign.
- 12 May: Settlement on sale of unit No. 3.
- 16 May: Settlement on sale of unit No. 5.
- 26 May: Settlement on sale of unit No. 1.
- 31 May: The architect leaves his employment.
1972
- 9 June: Settlement on sale of unit No. 6.
- 22 June: Settlement on sale of unit No. 4. (Gross proceeds on sale of five units $83,366; net proceeds $78,901.)
1972
- About January: Remaining three units sold. (This aspect was not regarded as relevant by either party, and there is virtually no evidence on it.)
1975
10. The architect's credibility has been attacked because of his stated belief that the solicitor had assured him that finance would
ATC 597
be available and the solicitor has denied that there was any assurance; and because of the architect's re-entry into projects on money borrowed from the money-lender very soon after the architect had said that he panicked when he appreciated the extent of his liability and the effective rate of interest. The explanation for the first conflict appears to be a too confident reliance upon his association in his venture with the nominal concurrence of his father-in-law who was a ``man of property'' and respected as such by the solicitor and by the money-lender. The explanation for the second conflict appears to be an over-reaction from an earlier state of euphoria to an apprehension of impending disaster, and a swift return to confidence when he and his wife are to share ventures with her parents in some instances and with his brother in others. I look on both conflicts as arising from temperament and as not being indicative of falsehood. There was a point stressed also suggestive of the architect under-estimating the cost in every project in which he was concerned. This could hardly arise from a desire to avoid payment of a relatively small scale increase. There was a difference of only a few thousand dollars in the instant case between the architect's estimate and the Shire's estimate.11. Any decision that the architect was untruthful in saying that his original intention was to hold the eight units as an investment involves a conclusion that his wife also was untruthful, and that they conspired to deceive the Board. Her evidence appeared to be given honestly and seemed to be accepted as such in cross-examination; although there was a submission based on case law (which I do not see to be applicable) that her purpose must be taken to be the same as her husband's.
12. Furthermore in both examination-in-chief and in cross-examination of the architect and of his wife and in the volunteered statements of the architect, purpose and motive and intention are all mixed up together. I think that this explains to a great degree the unsatisfactory form of some answers to questions and explains the impracticability of trying to do on short term borrowings what the architect and his wife were anxious to do. It seems to me that each of them was endeavouring to be truthful in evidence.
13. There is always a risk of error in the application of ``similar fact'' evidence, and it is used cautiously
(Mood Music Publishing Co. Ltd.
v.
De Wolfe Ltd.
(1976) 1 Ch. 119
;
Wirth
v.
Tuckey
(1949) Q.W.N. 42
;
Eichsteadt
v.
Lahrs
(1960) Qd.R. 481
;
(1961) Qd.R. 457
). Similar fact evidence is all the more dangerous when the inquiry is, as in sec. 26(a) cases, directed not to the purpose, (effect) of a transaction, but to a taxpayer's purpose and as a composite concept, i.e. ``acquisition with the purpose of profit-making'' (
F.C. of T.
v.
Miranda
76 ATC 4180
at p. 4192
) with respect to an isolated transaction which has or to a few isolated transactions which have a business element (
(Steinberg
v.
F.C. of T.
75 ATC 4221
;
(1975) 50 A.L.J.R. 43
;
Gauci
v.
F.C. of T.
75 ATC 4257
;
(1975) 50 A.L.J.R. 358
) but yet fall short of being the carrying on of a business, which would throw a case into sec. 25(1). The distinction between the two sections is important as the mode of calculation to arrive at the sum to be included in assessable income differs under these sections; as to single transactions being a business see
Brown
v.
Brook
(1971) 45 A.L.J.R. 400
per
Windeyer
J.;
Fairway Estates Pty. Ltd.
v.
F.C. of T.
70 ATC 4061
:
(1970) 123 C.L.R. 153
;
Esquire Nominees Ltd. as Trustee of Manolas Trust
v.
F.C. of T.
73 ATC 4114
;
(1973) 129 C.L.R. 177
;
Re Gerald Cooper Chemicals Ltd.
(1978) 2 All E.R. 49
.
14. Looked at from the point of view of sec. 26(a) I do not see any earlier or subsequent land transaction which could safely be used as a guide to the determination of the issue. Looked at from the point of view of sec. 25(1), there is no earlier transaction and only one subsequent transaction and only one subsequent transaction (as being a transaction where the taxpayers were acting as a partnership on their own account solely) which might throw some light on the problem. This one transaction was not investigated in evidence, except in a cursory way, as it is another dispute left for determination at some future date. Thus I exclude all transactions set out in the Commissioner's schedule (other than the one here in issue) from the direction to make a wide survey and an exact scrutiny.
15. In
Margan
v.
Commr. of I.R. (N.Z.)
(1978) 3 NZTC 61,259
at p. 61,267
Vautier
J. referred to
Plimmer
v.
Commr. of I.R. (N.Z.)
(1958) N.Z.L.R. 147
;
(1957) 11 A.T.D. 480
ATC 598
and to Commr. ofI.R. (N.Z.) v. Walker (1963) N.Z.L.R. 339 where there is a discussion of a taxpayer having a particular intention with regard to resale, though the actual purpose or objective of the purchase was a different one.
16. In
Buckland
v.
F.C. of T.
(1960) 34 A.L.J.R. 60
at p. 62
Windeyer
J. said
-
``When a person buys a property as a commercial money-making transaction and not for his personal use or enjoyment, the purpose he has in view is the use to which he intends to put the property to achieve his end. He may intend either to sell it at a profit, or to keep it as a revenue-producing asset. In relation to sec. 26(a) it is the main or dominant purpose of the acquisition that is significant. If a property, say a house or farm, were bought for the purpose of resale at a profit, it would be immaterial that the purchaser also had in mind to take the rents and profits in the meantime or pending selling to use it for some purpose of his own. In such a case two purposes, one primary and dominant, the other secondary and subordinate, are not incompatible and could both be accomplished...''
17. In
Chapman
v.
F.C. of T.
(1968) 117 C.L.R. 167
at p. 171
Menzies
J. said in respect of the case before him that it was vain to search for a dominant purpose for the purchase; and that in a case where one purpose for acquisition is to sell part of what is bought at a profit to meet or reduce the cost of the part to be retained, perhaps the only fair course is to attribute to what is proposed, two independent purposes, otherwise it could be that the part to be retained would have to be treated as property acquired for the purpose of profit-making by sale, e.g. if it were to be found that the dominant purpose for the purchase was to obtain a profit by selling part.
18. In
Commr. of I.R. (N.Z.)
v.
Hubbard
(1960) 8 A.I.T.R. 92
at p. 94
Adams
J. cited from
Robertson
v.
Police
(1957) N.Z.L.R. 1193
at p. 1195
``... this court is not at liberty to uphold the (taxpayer's objection) unless the evidence produces in its mind the required acceptance of the truth of the allegation''. So also in
Pascoe
v.
F.C. of T.
(1956) 30 A.L.J.R. 402
at p. 405
Fullagar
J. said: ``The question, therefore, which I have to ask myself is: Am I convinced
-
not beyond reasonable doubt, but as a matter of belief
-
that the partners, in making the acquisition, were not actuated by a dominant purpose of profit-making by sale?'' Thus the taxpayers are not under a heavy burden of proof as was suggested by submissions: the standard is simply the civil one of balance of probabilities (
Briginshaw
v.
Briginshaw
(1938) 60 C.L.R. 336
at pp. 360-361
).
19. The sale of the five units took place at the first opportunity after the units became identifiable as structures. Thus there is a similar inference to that stated in
Steinberg
and
Gauci,
viz., that the purpose of acquisition of the land and the construction of the five units was profit-making, i.e. to recover something in excess of outlays. Of course, the inference is rebuttable, and one way of posing the question is by reference to the reasons of
Jacobs
J. in
Gauci,
viz., where the taxpayers deny having the requisite intention as in sec. 26(a) (intention in the sense of profit-making purpose) and where this is not accepted, nonetheless before sec. 190(b) can operate there must be something in the evidence from which an inference as to that intention/purpose can be drawn. To put the matter more generally, the Commissioner as the party with the benefit of the statutory onus is entitled to succeed if the evidence is consistent with a hypothesis of the existence of disentitling circumstances as in sec. 26(a) or sec. 25(1) and the hypothesis has not been discharged by the taxpayers who have the burden of proof (cf.
General Motors-Holden's Pty. Ltd.
v.
Bowling
(1977) 51 A.L.J.R. 235
at p. 241
per
Mason
J.,
Gibbs, Stephen
and
Jacobs
JJ. agreeing, and
Barwick
C.J. dissenting).
20. At no material time did the taxpayers have the financial ability (even allowing them a more modest escalation in costs than in fact occurred) and so I do not regard the evidence as showing a purpose to buy the land, erect a block of eight units and retain all eight as an investment. They had hopes and it may be wishful expectations that they might do so (
Cunliffe
v.
Goodman
(1950) 2 K.B. 237
at p. 253
;
Lang
v.
Lang
(1954) 3 All E.R. 571
at p. 580
;
Buckland supra)
. However I would further hold that the taxpayers at the material time December 1969 (so also from all earlier points of time until 1972) had the
ATC 599
financial ability and that intention/purpose in respect of four of those units as an investment. I would hold that the objective evidence supports a finding in favour of the Commissioner in respect of four units sold, but as to other units the objective evidence supports a finding in favour of the taxpayers. At least three and more probably four units would have to be sold as a matter of commercial reality looking at the matter in December 1969 (certainly four such units if one looked at the matter in January 1972). The investment purpose was limited to four of the eight units. This was not the case put by either party; yet occasionally it happens that a matter must be decided on either a legal construction or on a factual basis which was not advanced or argued by either party (Delta Properties Pty. Ltd. v. Brisbane City Council (1955) 95 C.L.R. 11 at p. 24 ;
Jones v. Capaldi (1956) 30 A.L.J.R. 279 ). Chapman seems sub silentia to treat the general form of objection as sufficient in form to cover the view which I have taken of the matter.
21. On the view which I have taken there was not a frustration of the venture and so the principle of
Kratzmann
v.
F.C. of T.
70 ATC 4043
;
(1970) 44 A.L.J.R. 293
is not applicable.
22. The conclusion that the taxpayers had a profit-making purpose in respect of four of the eight units leads to a consideration of the applicability for those four units of each limb of sec. 26(a) and of sec. 25(1). In respect of the first limb of sec. 26(a) the main inquiry is as to identity between what was acquired and what was sold; in respect of the second limb of sec. 26(a) the major question is as to the comprehension of the subject matter of that limb within sec. 25(1). The present problem concerns not a disposal of the parcel of land which was purchased but a disposal of four out of eight home units erected on part of that land with a profit-making purpose for those four units only.
23. The scope of the first limb of sec. 26(a) is discussed by
Mason
J. in
Moruben Gardens Pty. Ltd.
v.
F.C. of T.
72 ATC 4147
;
(1972) 46 A.L.J.R. 559
. As is made particularly clear in the headnote to the report in 46 A.L.J.R., his Honour assumed without deciding that there must be essential identity between the land at the time of its acquisition by the taxpayer and at the time of its sale by the taxpayer, and he regarded the sale of all the strata title units as constituting a disposition of the entire estate in fee simple in the land. Thereupon
Mason
J. said that there was no lack of essential identity between what was sold and what was acquired.
24. On the other hand it seems that
Aickin
J. would regard the one-off transaction of such a type as being a second limb sec. 26(a) matter (
F.C. of T.
v.
St. Hubert's Island Pty. Ltd.
78 ATC 4104
at p. 4124
, and also
Jacobs
J. at p. 4118; where he says
-
``Again, the purchase in a one-off transaction of land or of a commodity in bulk with the intention of breaking down the bulk at some indefinite time in the future and of selling in broken down parcels does not appear to me to be the commencement of a business of trading in that land or that commodity, and the land or commodity cannot be regarded as the trading stock of a business in trading in that land or commodity. There is not then that continuity of activity which characterises a business. The acquisition of the land or commodity is a first step in what may or may not develop into a business... The asset must have been acquired for the purpose of resale before the question can arise whether the activities are trading activities.''
25. If land acquired for profit-making as a ``one-off'' venture is developed, from
in globo
to allotments or by the erection of a building with strata title units, and profits arise from the progressive sales of allotments or units then the finding that there is ``identity'' within the first limb of sec. 26(a) has its foundation in two Roman law maxims (i)
Cujus est solum ejus est usque ad coelum et ad inferos
and (ii)
quicquid plantatur solo, solo cedit
. Yet both maxims are subject to numerous exceptions:
vide Broom
and as to (i)
Nova Mink Ltd.
v.
Trans-Canadian Air Lines
(1951) 2 D.L.R. 241
;
Kelsen
v.
Imperial Tobacco Co. Ltd.
(1957) 2 W.L.R. 1007
;
Graham
v.
K.D. Morris
&
Sons Pty. Ltd.
(1974) 1 Qd.R. 1
;
Re Lehrer
(1960) N.S.W.R. 570
;
(1960) 77 W.N. (N.S.W.)415
; and as to (ii)
Wake
v.
Hill
(1883) 8 App. Cas. 195
at pp. 203-204, 207, 211
and
Holdsworth Historical Introduction to the Land Law
at p. 244 et seq.;
North Shore Gas Co. Ltd.
v.
Commr. of Stamp Duties (N.S.W.)
(1940) 63 C.L.R. 52
at pp. 68-69
.
ATC 600
Identity between what is bought and what is sold is dependent upon disposal of the entirety even though it be piecemeal.26. Whilst conflicting views were expressed in
F.C. of T.
v.
Bidencope
78 ATC 4222
; whether the second limb of sec. 26(a) is otiose, the Full Bench of the High Court
(Dixon
C.J.,
Williams, Webb, Fullagar
and
Kitto
JJ.) in the joint judgment in
Fox's case
(
Official Receiver in Bankruptcy
v.
F.C. of T.
(1956) 96 C.L.R. 370
) in answering questions whether the appellant (i)carried on a business or (ii) carried out a profit-making undertaking or scheme, decided (at p. 388) that (ii) was correct, and not (i). This was the reason that although Rankin (otherwise known as Fox) had been for many years a member of a partnership the business of which was to reclaim and sell land (p. 378) and he was the sole owner of the business at the time of his death (p. 379) his executors did not carry on the work after his death (p. 380); the official receiver as trustee began
abinitio
with assets which came to his hands and was pursuing a course for their realisation to the best advantage (p. 384); nonetheless it was not an indefinitely continuing business (p. 385) but ``a thing done once for all and for the purpose of converting the whole of the assets into money'' (p. 385). Where there is no continuing business (p. 385) the profit, if there be one, on such a transaction consists in an enhancement of price recovered above value at the inception (p. 386). The transaction upon which the official receiver embarked was an entirety; he was not selling blocks of land as a person habitually trading in land; he was simply realising assets in the way which appeared most advantageous (p. 386).
27. When Webb J. stated his questions (p. 373) for the Full Bench in Fox he did not even mention the first limb of sec. 26(a), and the discussion turns on the distinction between the second limb of sec. 26(a) and sec. 25(1).
28. In Fox's case the Court, at p. 387, said -
``But let it be supposed that by some means it could be ascertained that the land as it came to the hands of the official receiver possessed a quite definite value which could be and was in fact fixed and that an account made up on that foundation disclosed a clear profit. On that assumption it is difficult to resist the conclusion that the activities of the official receiver producing the result would fall within sec. 26(a)... These activities were planned, organised and coherent. True it is that they formed only the final stages of a plan conceived by Rankin and carried partly into execution by him... it seems too difficult to deny that the official receiver adopted and pursued an undertaking or scheme that from his point of view satisfied the description of `profit-making' and that he carried it out...
... Moreover although sec. 26(a) is founded on language which was used in judicial decisions (see
Premier Automatic Ticket Issuers Ltd. v. F.C. of T. (1933) 50 C.L.R. 268 at pp. 297-298 ) yet it provides a statutory criterion which must be applied directly and cannot be treated as going no further and producing no different result than would a criterion expressed as `exercising trade' or `carrying on a business'... Of course in the end the question whether a case falls under the operation of sec. 26(a) must be determined as a matter of fact.''
29. There has been criticism of
Fox's case
particularly by comparison of the phrase at p. 384 ``a gain or profit... by the realisation of the assets that came to his hands'' (meaning thereby a sec. 26(a) situation) and the principle stated by the majority of the Privy Council in
McClelland
v.
F.C. of T.
70 ATC 4115
at p. 4119;
(1970) 120 C.L.R. 487
at p. 494
, viz., ``a considerable body of judicial authority to the effect that a landowner may develop and realise his land without making a profit which partakes of the character of income: even though he goes about the realisation in an enterprising way so as to secure the best price.''
30. It is clear from Fox at pp. 379-382 that Rankin in his lifetime was not a landowner who was developing and realising his own land, and neither was that description true of the official receiver as a trustee. Rankin, so also the official receiver,
ATC 601
was a Crown lessee of part of the land and was using Crown materials for reclamation. Although the official receiver's counsel discussedScottish Australian Mining Co. Ltd. v. F.C. of T. (1950) 81 C.L.R. 188 ; also
Peel River Land & Mineral Co. (Ltd.) v. F.C. of T. (1954) 92 C.L.R. 467 during their submissions (at p. 375) the Full Bench of the High Court saw no need to refer to such matters.
31. I have concluded from the authorities which are cited in para. 23 to 30 hereof that the present case in respect of four units falls within the purview of the second limb of sec. 26(a) and that it is not within the first limb of sec. 26(a) and it is not a sec. 25(1) situation (so far as the latter distinction is necessary to be made, i.e., for calculation of profit cf.
F.C. of T.
v.
Thorogood
(1927) 40 C.L.R. 454
;
Perrott
v.
D.F.C. of T. (N.S.W.)
(1925) 40 C.L.R. 450
)
32. The taxpayers have proved that the assessments here in issue are excessive and so I would uphold the objection. They have not directed evidence to the quantification of the excess. As it is not known whether there were any contracts for sale of units exchanged earlier than 24 March 1972 (and that date only applies for two of the units) it is not possible to recalculate the relevant profit with any precision. Therefore as the profit has been calculated with respect to a sale of five units and I would hold it should be calculated with respect to a sale of four units, I would apply that fraction in reduction of each of the assessments here under review.
33. I would allow the objection of the architect to the extent of a reduction of $1,812 and amend the amended assessment whereby his taxable income becomes $15,793.
34. I would allow the objection of the architect's wife to the extent of a reduction of $1,812 and amend the amended assessment whereby her taxable income becomes $10,284.
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