Federal Commissioner of Taxation v Gordon

43 CLR 456

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(Judgment by: Rich J)

Federal Commissioner of Taxation v Gordon

Court:

Judges: Isaacs CJ

Rich JStarke J

Subject References:
Taxation and revenue
Income tax
Deduction
Expenditure for production of assessable income

Legislative References:
Income Tax Assessment Act 1922 (Cth) No 37 - ss 23(1)(a); ss 25(e)

Judgment date: 20 November 1929

SYDNEY

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Judgment by:
Rich J

RICH J. I think the judgment of my brother Dixon is correct. The attack made on it appears to me to depend substantially upon the view that the objects of the Association enable it to perform functions and expend money for purposes which, while advancing the appellant's business interests, are not confined strictly to the increase of assessable or gross income. The judgment under appeal lays emphasis on the fact that it is the disbursement by the taxpayer which has to be considered, and not that of the Association, although the manner in which the Association expended its funds is relevant because it showed or tended to show the purposes for which the taxpayer laid out his money in paying his subscription. The judgment further points out the necessity of exercising care in applying the English decisions, because the words "assessable income" in the Australian legislation take the place of the words "the purposes of the trade, profession, employment, or vocation" (8 & 9 Geo. V. c. 40, rule 3 to Cases I. and II. of Sched. D), and the learned Judge expressly holds that the outgoing was "incurred in producing the gross income from personal exertion derived during the calendar year 1926, and during the financial year ended 30th June 1927." The question is one of fact in each case (Maryborough Newspaper Co v Federal Commissioner of Taxation ^[F1] .)

It is obvious from the activities of the Association, as well as its rules, that membership, if not necessitated, is rendered highly expedient in order that the pastoralist may be represented in his relations with the labour by which his sheep are cared for and shorn. The main purposes which the Association fulfils on behalf of its members are intimately bound up with the production of their gross incomes, and it is difficult to say that anything which the Association did during the year of income did not tend either directly or indirectly to aid in the production of the assessable income. It may be true that some things it did may have tended also to diminish losses or outgoings. As a matter of speculation it may be also true that the Association might expend its money and efforts in some activity which tended to diminish its members' expenditure rather than to increase their revenue, but it is a very narrow and unworkable view of s. 25 (e) of the Income Tax Assessment Act 1922-1927-1928, which disqualifies an expenditure which produces or aids in the production of assessable income, i.e., revenue, because incidentally and accidentally it may aid in the curtailment of expenditure. But, as the primary Judge pointed out, the question is upon what the taxpayer expended his money and not how the Association disbursed its revenue, and I have no doubt the learned Judge was right in holding that the taxpayer did so to obtain the solid practical advantages which the Association gave him in earning his revenue and not the speculative and unreal and doubtful benefits by which his disbursements might be lessened.

The appeal should be dismissed with costs.