Case E3

Judges:
JL Burke Ch
RC Smith M
RE O'Neill M

Court:
No. 1 Board of Review

Judgment date: 1 March 1973.

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J.L.Burke (Chairman), R.C.Smith, Q.C. and R.E.O'Neill (Members): The taxpayer is an officer of a banking organisation (the ``Bank'') having joined the staff in early 1947 after achieving matriculation level in his secondary education. In March 1964, after qualifying in Accountancy, the taxpayer embarked on the degree course of Bachelor of Commerce which he completed on a part-time basis at the end of 1968. The Bank assisted the taxpayer in his Commerce course by granting full reimbursement of university fees, an annual text book allowance of $40 and, where necessary, time off for lectures.

2. On completion of the degree course the taxpayer was invited by the university to proceed to an Honours degree involving attendance full time at the Faculty for one year. He applied to the Bank for and was granted what was described as a ``full-time bursary''. In a letter to the taxpayer of 29

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ATC 10

January 1969 the Bank set out the terms of the award thus -

``The bursary carries with it full-time leave on full pay from the commencement of the 1969 academic year and provides for full payment of university fees plus a textbook allowance up to a maximum of $100. The first and second term university vacations are regarded as taking the place of annual leave, but an additional five working days' leave is granted immediately following the annual examinations.''

3. The taxpayer successfully completed the Honours degree in Commerce in the 1969 academic year and, after taking five days leave after the examinations, resumed full-time duty with the Bank. During the period of his leave the taxpayer continued to receive the salary he would have received had he been performing full-time duty with the Bank. He was on an incremental range and was duly granted the salary increment which fell due whilst he was on leave. From the salary paid to him during the academic year deductions were made for superannuation and the Board was told that the period of the taxpayer's leave counted as service for the purposes of seniority and long service leave. He was not bonded to continue service with the Bank after the completion of his Honours degree course.

4. The taxpayer claims exemption for the salary payments received by him from the Bank from March to November during the 1969 academic year (income years 1969 and 1970) on the footing that they represent income derived by way of bursary for the purposes of sec. 23(z) of the Income Tax Assessment Act 1936 (as amended). The statutory provision relied upon exempts ``income derived by way of a scholarship (other than a scholarship referred to in the next succeeding paragraph), bursary, or other educational allowance by a student receiving full-time education at a school, college or university, but not including an amount received by the student from a person or authority upon condition that the student will (or will, if required) render, or continue to render, services to that person or authority''. As the bursary was for one year only there was, so the taxpayer argues, no condition that he would render services to the Bank; he was free to resign from the Bank at the termination of his course.

5. Without considering further the above aspect of the case it is necessary to decide whether the salary payments received by the taxpayer the assessability of which is in issue are correctly described as a scholarship or bursary for the purposes of sec. 23(z). Clearly the text book allowances and the university fees reimbursed to the taxpayer fall within the description of a ``scholarship..., bursary, or other education allowance''. However, having carefully considered the matter we are of opinion that the amounts paid to the taxpayer whilst attending the university during the 1969 academic year do not fall within the description of ``scholarship'' or ``bursary'' in the context in which those terms are used in para. (z). Rather they have the character of salary paid to the taxpayer during a period of full-time leave, a period during which the employer-employee relationship subsisted and all employee benefits continued. Although, during the period of his leave, the taxpayer was a ``student'' for the purposes of sec. 23(z) the salary payments received by him were so received in his capacity as an employee and not as a student. They were not scholarship or bursary payments for the purposes of the provision.

6. We would uphold the Commissioner's decisions on the objections and confirm the assessments the subject of review.

Claim disallowed