Federal Commissioner of Taxation v. Wilkinson.

GN Williams J

Supreme Court of Queensland

Judgment date: Judgment handed down 18 May 1983.

G.N. Williams J.

This is an appeal by the Commissioner of Taxation from a decision of a Taxation Board of Review allowing an objection by the respondent-taxpayer, resulting in an amendment to the assessment made by the appellant of tax payable by the respondent for the year ending 30th June 1979 [reported as Case P124,
82 ATC 629]. The appellant, following the decision of the Full Federal Court in
F.C. of T. v. Mantle Traders Pty. Ltd. 80 ATC 4588; (1980) 49 F.L.R. 256, merely tendered the subject notice of assessment dated 15th November 1979, the notice of objection dated 20th December 1979, the appellant's determination dated 12th May 1980, the reference to the Board dated 20th May 1980, and the decision of the Board dated 10th December 1982. Counsel for the respondent then tendered the transcript of oral evidence received by the Board, and all documents placed before it. There was no fresh evidence placed before me. I was informed that the parties were in agreement that such course be followed and that each relied on the transcript of evidence before the Board. As the proceedings are now ``judicial in nature'', I have a duty to reach my own conclusions of fact on the evidence, and am not limited to determining whether or not the Board was right in reaching the conclusions of fact which it did; but in evaluating the evidence I am mindful of the fact that the Board had the advantage of seeing and hearing the witnesses and was therefore in a better position than I to assess the weight which should be attached to particular parts of the evidence (cf.
F.C. of T. v. Lewis Berger & Sons (Aust.) Ltd. (1927) 39 C.L.R. 468 at p. 469;
Rowdell Pty. Ltd. v. F.C. of T. (1963) 111 C.L.R. 106 at p. 119;
Krew v. F.C. of T. 71 ATC 4213 at p. 4216; (1971) 45 A.L.J.R. 324 at p. 326;
McCormack v. F.C. of T. 79 ATC 4111 at p. 4122; (1979) 143 C.L.R. 284 at p. 304; and F.C. of T. v. Mantle Traders Pty. Ltd. 80 ATC 4588 at pp. 4599-4600; (1980) 49 F.L.R. 256 at pp. 272-273). That was the approach adopted by Dixon C.J., Kitto and Taylor JJ. in
Charles v. F.C. of T. (1954) 90 C.L.R. 598 at p. 610.

The appellant alleges that:

``the interpretation placed by the Board of Review upon the provisions of subsec. (1) of sec. 51 of the Income Tax Assessment Act 1936 (as amended) and the application of those provisions to the instant case was incorrect because:

  • (a) the expenditure incurred by the Respondent in undertaking a course of flying instruction is not an allowable deduction within the meaning of those provisions;
  • (b) the said expenditure was not a loss or outgoing necessarily incurred in gaining or producing the Respondent's assessable income within the meaning of those provisions.''

Whilst I was referred at some length to the evidence before the Board, neither party seriously challenged any finding of fact made by the Board. The argument for the appellant was essentially that on the facts found by the Board the respondent had not established that the assessment was in law incorrect or ``excessive''.

The respondent became a trainee air traffic controller with the Department of Aviation (more precisely its predecessor) on 16th September 1968. He undertook the two year training course (cf. the pamphlet Air Traffic Control as a Career - Exhibit 8), graduating in 1970. On 13th December 1973 he was promoted to a ``class 2 air traffic controller'', and on his posting to Townsville on 27th March 1980 was promoted to ``air traffic controller class 3''. At his own expense he obtained a student pilot licence on 19th January 1979, and a restricted pilot's licence by 22nd June 1980. In June 1982 he

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obtained an unrestricted licence. He outlaid $2,000 for flying lessons during the 1979 tax year, and was allowed a self education rebate of $250 in relation thereto. He asserted that the balance, namely $1,750, was an ``outgoing'' which he ``incurred in gaining assessable income'', and was in consequence an ``allowable deduction'' by virtue of sec. 51(1). His relevant income tax return was prepared in accordance with that assertion but the Commissioner disallowed the claim. The respondent objected upon the following grounds:

``Mr. Wilkinson is employed as an Air Traffic Controller and as such is entitled to undertake a course in flying as part of his Air Traffic Control training. Air Traffic Controllers are promoted on the basis of seniority and efficiency. The taxpayer by learning to fly induces a higher level of efficiency, because of the necessity of controlling airborne traffic.

Completing the course will lead to automatic promotion in his field of employment, and because of the similar nature between flying aircraft and controlling airborne traffic it is not an exaggeration to mention that in taking flying lessons Mr. Wilkinson is actually fulfilling the terms of his employment.''

The Board unanimously upheld the contention of the respondent and ordered that the assessment be amended accordingly.

Three persons gave evidence before the Board; the respondent, Bruce Robinson who at the time was the Acting-supervisor of Standardization and Licensing in the Queensland region of the Department of Aviation, and Gerald Francis Loth the Senior Staff Clerk in the Department (the latter being called by the Commissioner). The evidence of Robinson went further than that given by Loth - perhaps because he was more intimately involved with the promotion process affecting air traffic controllers. Having read all of the evidence before the Board I prefer, on logical grounds, the evidence of Robinson; particularly as to the relevant factors affecting prospects of promotion. I accept his evidence and act upon it. I am comforted by the fact that the Board, who had the advantage of hearing each of the witnesses in question, obviously preferred the evidence of Robinson to that of Loth. Each of the judgments delivered by members of the Board is based on an acceptance of Robinson's evidence.

Robinson gave the following evidence, and I accept each statement as establishing the relevant factual position as to promotions generally, and the promotion of the respondent in particular:

``Those who have had flying training are - would be on the whole more efficient than those who have not had flying training...''

``Q. And when you are arranging the names in order of merit would you say that flying training or current aviation experience would be taken in account in that grading? - A. Certainly because it does reflect on the controller's efficiency which is taken into account for the order of merit selection.''

``Q. And what weighting would it be given? - A. It would depend somewhat on the job that the controller had to do. It would be given a fair weighting. It would not be listed separately as such, but it would reflect in his efficiency, which of course is the ultimate weighing anyway.''

``Certainly for the position at Archerfield it would have considerable weight, Archerfield being the main general aviation training area in Queensland and it would lend considerable weight in fact to anyone's selection for promotion to positions at Archerfield.''

``Q. So does the fact that one air traffic controller has a pilot's licence necessarily make him more efficient than one who has not got such a licence? - A. I do not think you would use the word `necessarily'. It could reflect in his efficiency, the fact that one controller has had flying experience. It would normally make him more efficient, therefore he would be regarded as being more efficient than one who had not.''

``Q. Essentially what you were saying is that a knowledge of flying skills improves efficiency and efficiency is the basis of promotion? - A. Certainly.''

``We prefer aeronautic experience. In fact our other selection of those without aeronautic experience are in fact exposed

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to airline flying for a period of six weeks, flying in the cockpits of airliners, they are not learning to fly, but this is the best that we can get to an exposure to aviation for them.''

``The form which the controllers fill in for applications for promotion in fact does have a section regarding any other qualifications. All those with flying experience do record the fact that they do have flying experience in the other qualifications and that is certainly looked at when we are going through the forms for selection for promotion.''

Those passages have been selected to highlight Robinson's evidence. I do not consider each of the statements in isolation, but in the total context of his evidence. It must be remembered that he also said that an officer, considered to be of superior efficiency, would be promoted in preference to a less efficient officer who happened to be the holder of a pilot's licence.

There are other parts of the evidence which clearly indicate the importance of flying experience to an air traffic controller. A person with flying experience may qualify for the shorter training couse (cf. Exhibit 8), trainees without flying experience must travel in the cockpit of commercial airliners for a period to familiarise themselves with the ``pilot situation'', and the department will meet the expenses of some controllers seeking to obtain a pilot's licence (cf. the document entitled ``Administrative Instructions Part 15'' - Exhibit 7). That document contains the statement: ``Current flying competence gives the controller a better appreciation of his duties and builds his prestige in the eyes of the general aviation industry.'' The validity of such a proposition is self evident. Paragraph 3.2 of the document states: ``No position (except some in the Air Safety Investigation Branch) shall have flying qualifications written into its requirements, even as a desirable requirement.'' Robinson indicated that the reason such statement was included was that the department wanted to avoid a financial commitment to training all controllers as pilots. The duty statement applicable to the respondent requires him, inter alia, to ``maintain separation standards in respect of all aircraft operations in the designated area of responsibility; hand-off identification of, and control responsibility for, arriving aircraft to the approach/departures control cell; maintain a continuous display of all relevant aircraft and ensure the application of nonradar separation immediately following a radar failure''. Under the heading ``Qualifications and experience other than prescribed'' the statement details:

``1. Extensive experience in radar and nonradar traffic control functions at the first level of complexity and responsibility.

2. Ability to exercise initiative and independent judgment in the application of Airways Operations Instructions appropriate to radar and nonradar control of aircraft.''

One has only to reflect on such obligations for a moment in order to be convinced that flying experience, if not essential, is a highly desirable attribute for an air traffic controller and would of necessity increase his efficiency. It is only to be expected that other factors affecting efficiency being equal, the person with flying experience would be promoted.

Finally it should be noted that the respondent asked the department to finance his flying training in accordance with Exhibit 7 but his request was refused. He then decided to undertake the course at his own expense. Subsequently he applied for promotion along with a number of others and in support of his application he stated that he was undertaking flying training. As stated above he received that promotion on 27th March 1980, after he had flying experience over some 14 months and was approximately three months away from obtaining his restricted pilot's licence. In evidence he said (through it carries little weight) that he was ``sure'' that his flying training was an influential factor in his obtaining that promotion.

Though the evidence of Robinson is preferred to that of Loth it should be noted that the later said that though flying experience was not a prerequisite to promotion it ``certainly would help''; he went on to say: ``it would be a significant factor in the selection but it is not mandatory''. He also said it ``must be an

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asset to have this training when they look at promotion''. He agreed with the proposition that other things being equal the person with flying experience would get the promotion.

Against that factual background the Court has to determine whether or not the expenditure in question is an ``allowable deduction'' under sec. 51(1). Though there are certain general principles which apply whenever it is sought to establish that an outgoing is an allowable deduction, each individual case must be determined on its own facts. Speaking generally of sec. 51(1), Wilson J. observed in
F.C. of T. v. Forsyth 81 ATC 4157 at p. 4163; (1981) 55 A.L.J.R. 340 at p. 343:

``In every case it is clearly a question of fact and degree whether the outgoing has the necessary relation to the gaining of assessable income.''

In the leading case involving an ``outgoing'' designed to increase one's knowledge, efficiency or aptitude Dixon C.J. said:

``... the issue must be whether the expenditure was incurred in gaining or producing the assessable income and, although the meaning and application of this phrase have been elucidated judicially and perhaps may be further so elucidated, in the end the decision often will depend on the facts of the given case.''

F.C. of T. v. Finn (1961) 106 C.L.R. 60 at p. 64.)

Those observations are particularly relevant here because I was pressed with a decision of the No. 1 Board of Review said to be contrary to the decision here appealed from. On the facts before it that Board held in Case P32,
82 ATC 146 that an air traffic controller was not entitled to a deduction under sec. 51(1) for the cost of flying lessons. It will be necessary for me to review that decision, but it is important to note that the evidence before that Board did not go as far as the evidence here.

The applicable general principles must be deducted primarily from the decision in Finn's case. There the taxpayer was a senior design architect employed by the Public Works Department of Western Australia. He had accumulated leave and, of his own volition, went on an overseas tour for the express purpose of studying current trends in architecture with a view to improving his prospects of future promotion. At the request of his employer he did include a visit to South America in his itinerary, and the employer paid the additional costs incurred by that extension. The taxpayer claimed that ``he incurred the expenses of travelling in order the better to fit himself to perform the work which the Western Australian Government required of him'' (at p. 63). The following extract from the judgment of Dixon C.J. (at pp. 67-68) is the starting point in determining the correct application of sec. 51(1) to facts such as those involved here:

``From the facts that have been stated above three or four conclusions may be drawn which perhaps may be considered to govern the question whether the expenditure was incurred in gaining or producing the assessable income. In the first place it seems indisputable that the increased knowledge the taxpayer sought and obtained of his subject and the closer and more realistic acquaintance he secured of modern developments in design and construction made his advancement in the service more certain, and that in respect of promotion to a higher grade these things might prove decisive. This was put clearly by the Principal Architect, though in a letter written ex post facto, `I understand from you that the Commissioner now desires to know whether the experience obtained and the large amount of data collected will result in an increase in your income. To me, it is obvious that this must increase your professional efficiency, and hence your value to this Department, and must materially assist your future advancement to a higher position in the Department with consequent increase in income.' In the second place, so far as motive or purpose is material, advancement in grade and salary formed a real and substantial element in the combination of motives which led to his going abroad. In the third place it is apparent that the heads of his Department, and indeed the Government itself, treated the use which he made of his long service and other leave to study architecture, increase his professional knowledge and study modern trends, as a matter not only of distinct advantage to his work for the State but of real

ATC 4300

importance in at least one project in hand. In the fourth place it was all done while he was in employment of the Government, earning his salary and acting in accordance with the conditions of his service. He was in fact complying with the desires, and so far as going to South America was concerned, with the actual request of the Government. His journey abroad and what he did while in Europe, as well as in South America in the following year of income, was therefore in a correct sense incidental to his employment and most relevant to it.

When the foregoing elements are considered in conjunction, they do seem to form a firm foundation for the conclusion that the expenditure was in truth incurred in gaining or producing assessable income.''

He went on to point out that the increase or gain in assessable income need not occur in the taxation year in which the outgoing was incurred (cf.
Ward & Co. Ltd. v. C. of T. (N.Z.) (1923) A.C. 145 at p. 148).

Kitto J. agreed, giving separate short reasons of his own. He considered that the entitlement to the deduction would exist even ``if the relevance of the expenditure to the respondent's prospects of promotion were to be put on one side''. He went on to say (at p. 69):

``The respondent incurred the expenditure during a period of leave, and in carrying out activities beyond any which had been or could lawfully have been specifically required of him by the Government. But it was nevertheless in my opinion incidentally to the proper execution of his office and not otherwise that he engaged in those activities. For the office was of a kind which by its nature made incumbent upon the occupant much more than the performance of set duties at set times. Its professional status implied an obligation of progressive acquaintance with a living and developing art. It was therefore, I think, plainly incidental to the office that the respondent should avail himself of such opportunities as might arise to add, in the interest of the State even if also in his own interests, to his knowledge and understanding of architectural achievements and trends overseas, both in design and in construction, and of endeavours made and being made to solve architectural problems such as might from time to time confront his Government.''

Windeyer J. gave short reasons, agreeing with the result, but perhaps containing a broader proposition than that on which the other judgments are based. He said, inter alia:

``Generally speaking, it seems to me, a taxpayer who gains income by the exercise of his skill in some profession or calling and who incurs expenses in maintaining or increasing his learning, knowledge, experience and ability in that profession or calling necessarily incurs those expenses in carrying on his profession or calling.''

(At p. 70.)

Menzies J. was called upon to consider those principles in
F.C. of T. v. Hatchett 71 ATC 4184; (1971) 125 C.L.R. 494. In that case the taxpayer sought to claim a deduction in respect of two amounts paid out in order to obtain higher academic qualifications. The first was a payment of $89 in connection with the submission of theses for the purpose of gaining a Teacher's Higher Certificate. Such a certificate was necessary before a teacher could be promoted from the scale B classification to the scale A classification, and also before a teacher could progress beyond the 11th grade in scale A. Once the certificate was obtained the teacher was entitled to a higher salary without change of status. In relation to that item Menzies J. said:

``The taxpayer, in reliance upon the conditions of his employment, spent money to earn more. In these circumstances the outgoings necessary to obtain the certificate ought, I think, to be regarded as outgoings incurred in gaining assessable income. This conclusion is, I think, supported by the decision in F.C. of T. v. Finn...''

(At ATC p. 4186; C.L.R. p. 498.)

The second payment was for university fees for subjects in the Faculty of Arts. A university degree was necessary before the taxpayer could be promoted to headmaster

ATC 4301

or deputy headmaster of a secondary school. At ATC p. 4186; C.L.R. pp. 496-497 Menzies J. said:

``Any relationship between any assessable income of the taxpayer and the payment of university fees is problematical and remote. Having regard to the taxpayer's lack of success in passing university examinations it is not possible to find affirmatively that there exists any connection between the payment of university fees in 1967 and the earning of assessable income at any time in the future. The prospects of the taxpayer obtaining a university degree leading to his promotion to positions in the service for which a university degree is prerequisite affords no ground for concluding that the Commissioner was in error in refusing to allow the fees paid as deductions. If these fees are deductible it must be on a simpler footing, namely that expenditure upon university study, which the department encourages teachers to undertake, is, without more, incurred in gaining assessable income as a teacher.''

After stating that encouragement by an employer leading to an employee expending money in improving mind and body is not sufficient he said that he was ``not dealing with the general question whether the payment of university fees can ever afford a deduction from assessable income''; he was dealing with ``the particular question whether the fees paid by the taxpayer in the circumstances already stated are deductible''. He then reiterated that he was ``not able to find any connection between the payment of fees and the assessable income of the taxpayer beyond the circumstance... that a teacher who has pursued university studies is likely to be a better teacher than if he had not done so and is therefore more likely to obtain promotion within the department'' (at ATC p. 4187; C.L.R. p. 499). That was not enough in his view to make the fees deductible. The learned judge formulated a test for deductibility which has been much quoted: ``there must be a perceived connection between the outgoing and assessable income''.

Finn's case and Hatchett's case were analysed by Helsham J.
F.C. of T. v. White 75 ATC 4018; (1975) 1 N.S.W.L.R. 1.

There the taxpayer, a clerk employed by a firm of chartered accountants, had commenced an accountancy certificate course at night at a technical college prior to commencing employment. He continued with such studies during his employment. The course was of general relevance to his employment but there was no agreement with his employer that upon successful completion of it he would be promoted or would be be entitled to a salary increase. Helsham J. reversed the decision of the Board and held that in the circumstances the taxpayer was not entitled to a deduction for the costs of attending the course.

The learned judge, applying the reasoning of Menzies J. in Hatchett's case, held that the fact that an employer encouraged an employee to undertake study relevant to the employment was not sufficient to make the expenses deductible under sec. 51(1). After analysing Finn and Hatchett he concluded that it was ``clear that both cases are authority for a proposition that expenses incurred in connection with education undertaken by an employee and related to his employment may be outgoings incurred in gaining or producing income from his employment'' (at ATC p. 4020; N.S.W.L.R. p. 5). Finn's case he considered could be based on either of two grounds:

``The first and narrower ground is that the trip and expenses connected with it was and were simply part and parcel of his employment, taken and incurred during and as part of his job and, I suppose one could add, what one could clearly see as being an activity appropriate to the office held...

The second or wider ground for the decision is that expenses incurred by a taxpayer for education that will better equip him as an employee to carry out the duties of his employment and will further his prospects of advancement in that employment and so increase his income can be outgoings incurred in gaining or producing his income.''

(At ATC p. 4021; N.S.W.L.R. pp. 5-6.)

After his analysis of Hatchett's case, he concluded that only the broader basis for the decision in Finn's case supported the decision in Hatchett. On his view the costs of

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obtaining the Teacher's Higher Certificate ``had a direct and immediate result in increasing income''; whereas the incurring of university fees ``had no such clear effect upon the taxpayer's income, nor could any effect in the future be predicted''. Thus his Honour was able to reconcile Finn and Hatchett. He went on:

``As the result of the decision in the two cases it seems to me possible to say that expenses incurred in pursuing studies associated with employment will qualify as allowable deductions under sec. 51 when it can be said that those studies are part and parcel of the employment, which means that the expenditure is incurred in the process of carrying out the employee's duties, or, even if they are not such, they can be seen to have a direct effect on income. Where that cannot be seen, I think it will be difficult to establish the necessary connection between the study activity and the employment so as to give study expenses the character of outgoings incurred in gaining or producing the income derived from the employment.

In my view there is no sufficient association in the present case.''

(At ATC p. 4022; N.S.W.L.R. p. 7.)

It is obvious that by using the phrase ``direct effect on income'' the learned judge was not saying that there had to be an immediate increase in income before there could be a deduction under sec. 51. His reasoning generally recognises the principle, clearly laid down by the High Court, that the effect on income may not materialise until subsequent tax years. Also the entitlement to the deduction must be determined in the light of the circumstances in which it was incurred, and the fact that, because of the operation of the vicissitudes of life, the expected increase in income was not forthcoming does not necessarily defeat the claim (cf.
F.C. of T. v. Highfield 82 ATC 4463).

Paramac Printing Co. Pty. Ltd. v. F.C. of T. (1964) 111 C.L.R. 529 Owen J. considered that Finn's case was applicable to the facts before him. Though he did not use such phraseology, he was applying the wider rather than the narrower basis for that decision as defined by Helsham J. Owen J. considered that the overseas trip in question would ``advance their own techniques, widen their minds and given them new ideas which would be of real benefit to them and to the business in which they were engaged'' (at p. 537). That was a sufficient ``perceived connection'' between the outgoing and the obtaining of income to enable those taxpayers to claim a deduction under the first limb of sec. 51(1).

Waddell J. in
F.C. of T. v. Kropp 76 ATC 4406 allowed as a deduction an accountant's fares in travelling to Canada on the ground that the expenditure was part of a plan pursued by the taxpayer to increase his income from his employment as an accountant by having two years' overseas experience with a national firm associated with his Australian employer, at the conclusion of which it could have been anticipated with considerable confidence that he would be re-employed in Australia at an increased salary and that the rate of increase of his salary in his remaining professional life would be accelerated. His Honour took up the phrase ``perceived connection'' and considered that the taxpayer's plan, which was reasonably calculated to achieve its object, afforded such a connection. In that case (as in the case before me) the taxpayer's expectations had been fulfilled. The learned judge asked the question:

``[was] the pursuit of overseas experience... inherently likely to result in the taxpayer receiving on his proposed return to Australia promotion and an increase in his salary earlier than he might otherwise have expected.''

(At p. 4411.)

Waddell J. applied similar reasoning in his judgments in
F.C. of T. v. Smith 78 ATC 4157 and
F.C. of T. v. Lacelles-Smith 78 ATC 4162. In the former he spoke of the course of study giving the taxpayer ``a reasonably certain assurance of promotion in rank and advancement in salary'' and in the latter he concluded that when the taxpayer commenced his course ``it was reasonable to suppose that his pursuit of the course would lead to the promotions and increase in salary which he has gained''. However it must be pointed out that in the latter case the commencement of the course was a necessary prerequisite to the taxpayer being promoted. But the critical proposition is that the deductibility does not depend upon

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promotion in fact occurring. The nexus is established if there is a reasonable assurance that promotion will follow. The real reason why the taxpayer failed in Case N24,
81 ATC 131 was that she had reached the top of the promotion ladder, and her overseas experience, though making her a better history teacher, could not lead to an increase in income. There was no ``connection'', perceived or otherwise, between the outgoing and income likely to be earned.

Finally I must mention the decision of Smith J. in
Burton v. F.C. of T. 79 ATC 4318. The learned judge was there dealing with a claim for a deduction under sec. 51(1) of the costs of running a car from home to the taxpayer's principal place of employment. In the course of the judgment reference was made to Finn's case; then Smith J. arguably applied the test - was it an implied term of the contract of employment that the taxpayer incur the expense involved in bringing the car to work each day. Whilst it may have been correct to apply that test on the facts of the case in question, that test is not itself supported by the decision in Finn. The decision does not suggest that such a test should be applied to the facts of this case.

In this case the respondent incurred the expenditure in question in order to better equip himself to fulfil his responsibilities as an air traffic controller. One of his main motives (if not the sole motive) was to improve his prospects of promotion and advancement in grade and salary. He became better equipped to carry out the duties of his employment. It is indisputable on the evidence that the obtaining of flying qualifications and experience, the consequential greater appreciation of the responsibility of an air traffic controller, and the consequential increase in efficiency, made advancement in the service more certain; such factors are often decisive in relation thereto. The responsibilities of an air traffic controller in an age of changing technology demand a progressive acquaintance with all aspects of aviation and there is an implied obligation incidental to the position that an air traffic controller will avail himself of opportunities to maintain and improve his efficiency. Departmental heads, and those responsible for determining promotions, treat flying qualifications as a matter of distinct advantage. Promotion in fact followed quickly upon the respondent's obtaining his student pilot's licence, and that (on the balance of probabilities) was a material, if not decisive, consideration; that promotion carried with it an increase in salary. The respondent spent money to make it more certain that he would earn more. The obtaining of a pilot's licence went beyond ``improving mind and body''; there was a ``perceived connection'' between the outgoing and obtaining assessable income, in that the obtaining of the licence made it ``inherently likely'' that the respondent would be promoted and receive a higher salary. Further, the conduct and expenditure was reasonably calculated to produce that result. Each of these matters taken in conjunction provides a foundation for, and leads inevitably to, the conclusion that the expenditure was incurred in gaining assessable income as an air traffic controller.

As stated above the evidence before the Board in Case P32 was substantially different from that before me. In the view of the Board, there was ``no perceived connection'' between the outgoing and assessable income, principally because the evidence did not establish the necessary relationship between the obtaining of a flying licence and the probability of promotion. But that was not the real basis for the decision. The reasoning of each member could be summarised as follows: it was not an implied term of the contract of employment that the taxpayer have or obtain a flying licence, therefore the outgoing in question was not deductible. Insofar as the members of the Board applied that test and that test alone, it appears there is an error in their reasoning. The question whether or not the outgoing is incurred in consequence of an implied term in the contract of employment is always relevant, it may in some factual situations be decisive, but it is never conclusive (at least in factual situations similar to that under consideration here). For the reasons I have given above, I do not consider that Finn's case, Hatchett's case, and White's case support the reasoning of the members of the Board in that case. I can find nothing in that judgment which causes me to alter the conclusion I have expressed above.

In the circumstances the appeal should be dismissed.

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