James Fenwick & Co Ltd v Federal Commissioner of Taxation

29 CLR 164

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(Judgment by: Knox CJ, Gavan Duffy J, Rich J)

Between: James Fenwick & Co Ltd
And: Federal Commissioner of Taxation

Court:

Judges:
Knox CJ
Gavan Duffy J
Rich J

Subject References:
Taxation and revenue
Income tax
Source of income
Requisitioning of property by Commonwealth
Compensation

Legislative References:
Income Tax Assessment Act 1915 (Cth) No 34 - s 3; s 10
Defence Act 1903 (Cth) No 20 - s 67

Hearing date: 18 April 1921
Judgment date: 18 April 1921

SYDNEY

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Judgment by:
Knox CJ
Gavan Duffy J
Rich J

In this case it appears that in the year 1917 the Commonwealth Government on behalf of the Admiralty, acting under Statutory Rule No. 173 of 1915, requisitioned two tugs, the Heroic and the Heroine, belonging to the appellant. At that time the appellant was carrying on business in Australia, the tugs were in Australia, the requisition was notified in Australia and the tugs were in due course handed over in Australia. Under the Statutory Rule in question a right is given to the owner of property requisitioned to obtain compensation in respect of the taking, or "requisitioning" as it is called, of the property. The tugs, having been requisitioned in Australia and handed over in Australia, were taken by order of the Admiralty to foreign parts outside Australian waters, and were used there during the period which is relevant to the consideration of this case, that is, from 30th May to 30th June 1917. Ultimately the appellant received in respect of compensation so far as that period was concerned the sum of PD976 10s., which is the subject of the present controversy as to the liability of the appellant to income tax. Because the tugs were taken, and directly they were taken, a right to a sum of money arose by way of compensation for the taking, and the sum of money I have mentioned has been paid in respect of such compensation. As Mr. Leverrier pointed out, it was utterly immaterial to the appellant where the tugs were taken, where they were used or whether they were used at all, or what became of them. The appellant had the same right to compensation whatever was done with the tugs, because, and only because, they had been requisitioned by the Commonwealth on behalf of the Admiralty. In that state of facts we think that the real practical source of this income was the taking of the tugs in Australia. Consequently the source of the income is in Australia and the income is taxable.

For these reasons we answer the question submitted in the affirmative.