Case G41

Judges: FE Dubout Ch
G Thompson M

N Dempsey M

Court:
No. 3 Board of Review

Judgment date: 9 June 1975.

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N. Dempsey (Member): My colleague, Mr. Thompson, has set out the facts of this reference and it is unnecessary for me to repeat them.

2. It has long been established and I would have thought accepted that the treatment of an expense in the financial accounts of a company is in no way indicative as to whether it should be treated as an allowable deduction for income tax purposes. To be allowable it must pass the tests laid down in sec. 51(1).

3. I am unable myself, to distinguish this case in principle with the circumstances that existed in the case
Broken Hill Theatres Pty. Ltd. v. F.C. of T. (1952) 85 C.L.R. 423 , and consider that the decision in that case is equally applicable in this case.

4. The taxpayer incurred the expense, in my view, in an endeavour to protect not the income of the company as it claimed, but the structure from which it derived the income. In the Broken Hill Theatres case supra , the expenditure was incurred for the self same reason and it was held to be immaterial that there could be a recurring need to incur such an expenditure in the future. To protect ``the income of a business'' an expression used by the taxpayer, seems to me to be an inept explanation of the need for the expenditure here in question. There can be no income unless there is a business structure to earn the income and the expense must surely be to protect the structure and not the income.

5. I do not feel it is necessary to canvass other arguments advanced on behalf of the taxpayer. As I have indicated, the decision in the Broken Hill Theatres case is applicable and the decision of the Commissioner to disallow the objection is confirmed.

Claim disallowed