Farnsworth v. F.C. of T.
(1949) 78 CLR 50423 ALJ 308
9 ATD 33
(Judgment by: Rich J)
Farnsworth
v. Federal Commissioner of Taxation
Judges:
Latham CJ
Rich JDixon J
McTiernan J
Webb J
Subject References:
Income Tax (Cth)
Judgment date: 4 August 1949
Judgment by:
Rich J
The facts in this interesting case are somewhat complicated but the lacunae in the case stated have been filled by the clear and detailed opinions of the Board of Review who had the advantage of hearing evidence. A review of the facts leads me to the conclusion that after a fruit grower has delivered his fruit to the packing company and it has been processed he has lost all control and power of disposition of it and his fruit has become so inextricably mixed with the fruit of other growers as to be incapable of identification. The property in the fruit passed to the packing company and became converted into a claim for an account. The grower's interest is not an equitable interest but an equity to an account enforceable by action. In the instant case the appellant received "door" and "progress payments" from the "pool," that is "the proceeds of the sale of the fruit delivered to, processed and packed by the several packers concerned." The object of these payments is to support the grower - keep the wolf from the door - while the fruit in the pool is being realized. In the year ending the 30th day of June 1943 the appellant received from the packing company the sum of 340 pounds on account of her interest in the dried fruit in the "pool." And on this date in each year the packing company was accustomed to make an estimate as of that date of the net proceeds received by it of fruit in "the pool" and to give to each grower a statement showing the net balance which it was estimated he would receive after deducting the "door and progress payments" already mentioned. In the case of the appellant the assessed or estimated amount she was likely to receive after deducting the sum of 340 pounds referred to was, the company stated, 648 pounds in respect of the relevant year ending 30th June 1943. The commissioner amended the appellant's return by including this sum as "the value of produce on hand at the 30th June 1943" considering it to be "stock on hand" at that date. This assessment is, I think, incorrect. (at p515)
In my opinion, when the appellant handed over her fruit and it was processed she ceased to be the owner of it and it was not part of her stock in trade. If and when stock is sold and the proceeds of sale are received by the owner, such proceeds become assessable income from the date of sale. The sum in question was merely a prophetic estimate of the share of the net proceeds of sale she might receive after the sale. (at p516)
For these reasons I would answer the questions propounded in the negative. (at p516)