The Squatting Investment Co Ltd v Federal Commissioner of Taxation
86 CLR 5701953 - 0413A - HCA
[1953] ALR 366
(Judgment by: Webb J)
Between: The Squatting Investment Co Ltd
And: Federal Commissioner of Taxation
Judges:
McTiernan J and Williams J
Webb JFullagar J
Kitto J
Subject References:
Taxation and revenue
Income tax
Assessable income
Acquisition of wool supplied by grower in course of business
Legislative References:
Income Tax Assessment Act 1936 No 27 - s 6; s 25; s 26(g)
Wool Realization (Distribution of Profits) Act 1948 No 87 - s 7; s 28; s 29
Wool Realization Act 1945 No 49 - s 9; s 10
National Security (Wool) Regulations 1939 SR No 108 - r 30
Judgment date: 13 April 1953
SYDNEY
Judgment by:
Webb J
In Ritchie v Trustees Executors & Agency Co Ltd, [F35] at p. 580 this Court held that payments made under the Wool Realization (Distribution of Profits) Act 1948 were "receipts resulting from the operations of wool growing". This suggests that those receipts are assessable income as defined by the Income Tax Assessment Act 1936-1949; at all events as regards those suppliers of wool for appraisement who were also the growers of the wool, as most suppliers were. But it is submitted for the appellant taxpayer that, although Ritchie's Case [F36] has not been overruled by Perpetual Executors Trustees and Agency Co (W.A.) Ltd v Maslen, [F37] still certain observations in Ritchie's Case [F38] are inconsistent with the basis of the decision of the Privy Council in Maslen's Case. [F39] In the latter case their Lordships observed [F40] that payments under the 1948 Act were "a true gift" to the suppliers of the wool for appraisement and that they were not the result of a contract or debt which came into existence when the wool was supplied for appraisement. That would not have been inconsistent with the payments being assessable income. But their Lordships also referred to the payments as "a personal gift".
Although in the reasons for judgment in Ritchie's Case [F41] the payments are not expressly referred to as a gift of any kind it is pointed out [F42] that no legal right to these payments had been conferred upon the wool suppliers until the 1948 Act was enacted, and that all that the suppliers had prior to such enactment was an assured expectation. If then the wool suppliers received something to which they had no legal right but only an expectation, it is difficult to see how there could have been anything but a gift. But gifts may be income and liable to tax. It was so held by the House of Lords in Blakiston v Cooper [F43] where Easter offerings tot he clergy were held to be taxable income.
However, as already stated, in Maslen's Case [F44] their Lordships characterized a payment under the 1948 Act as "a personal gift". In Seymour v Reed, [F45] at p. 559 Viscount Cave L.C. had already held that the net proceeds of a benefit cricket match should be regarded as "a personal gift and not as income from the appellant's employment". What his Lordship would have held if the gift had been of a proportion of the gate receipts at earlier matches in which the taxpayer had played to the financial benefit of his club we can only speculate. Here the amount of the gift is determined wholly by the value of the wool supplied for appraisement, and yet it is a personal gift. But if it is a personal gift for one purpose, I think it must be held to be a personal gift for all purposes. As I understand the term "personal gift" it is absolute and not relative; so that if the claim of an assignee of a partnership is defeated by the personal nature of a gift, so too is that of the Income Tax Commissioner. The description by their Lordships in Maslen's Case [F46] of the payment as "extra proceeds" and "additional payment" may, I think, be disregarded like the expressions "extra profit" and "extra sum" as not intended to indicate the precise quality of the payment. But to the commissioner's claim that it is assessable income the answer is, I think, that the term "personal gift" was used to denote that precise quality; that its meaning is certain and not indefinite, is constant and not variable; and that it excludes income in the ordinary acceptation of the term i.e. as the term is used in s. 25 of the Income Tax Assessment Act. The quality of personal gift was not attributed to the Easter offerings to the clergy in Blakiston v Cooper [F47] and those offerings were held to be income; it was attributed to the gift to the cricketer in Seymour v Reed [F48] and it was held that the gift was not income. In this regard I can see no difference between income from employment or from an office and income from a business. I realize that income may be assessable under s. 25 although it is not from any of those sources. In Commissioner of Taxation v Dixon [F49] this Court held that gifts that were not derived from such sources were nevertheless income under s. 25. That was because they were periodical and were for the maintenance of the donee and his dependants. That case indicates that even such undoubted personal gifts as charitable payments made e.g. to a pauper in a hospital or other institution for his maintenance therein are income within s. 25. They are not income from personal exertion or from property, apart from the statutory definitions, but they are still to be regarded as income within the ordinary meaning of the term. However, that is because the payments are recurrent, a consideration which had weight with Lord Phillimore in Seymour v Reed. [F50] Here, however, we are dealing not with recurrent payments but with a single payment which moreover was not made for the maintenance of a donee and his dependants, as the payments in Dixon's Case [F51] were assumed to be.
For a time I took the view that the quality of the payment in question here as a personal gift merely gave rise to a doubt as to whether the payment was income within s. 25; but eventually I reached the conclusion that it was decisive in favour of the taxpayer.
The commissioner also relies on s. 26 (g) which makes assessable as income "any bounty or subsidy received in or in relation to the carrying on of a business". However, I think, as counsel for the taxpayer submit, that this provision is a compound expression designed to deal with payments received to assist in carrying on a business. This is not such a payment.
I would answer the questions in the case-
- (i)
- No.
- (ii)
- Does not arise.