Case H28

Judges:
FE Dubout Ch
N Dempsey M
P Gerber M

Court:
No. 3 Board of Review

Judgment date: 13 July 1976.

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F.E. Dubout (Chairman): My colleague, Mr. Dempsey, has set out the relevant facts of this reference, and I shall not needlessly repeat those facts. As I prepare to come to a concluded view on the matter in issue, I find that I am placed virtually in a position of having to cast a deciding vote, since my colleagues have already reached conclusions which are diametrically opposed on the question as to whether the subject expenditure was or was not an expenditure of capital or of a capital nature.

2. After careful consideration of the two competing viewpoints which are canvassed in the decisions of my colleagues, I feel constrained to follow the decision of my colleague, Mr. Dempsey. In so deciding, I have been particularly influenced by the views expressed by Kitto J., on the matter of demolition expenses, in the
F.C. of T. v. Broken Hill Proprietary Company Limited (1969) 120 C.L.R. 240 , at p. 260 et seq . Although certain other matters in issue in that case were the subject of appeal to the Full Court, it appears that his Honour's decision in relation to demolition expenses was not challenged: see 120 C.L.R. at p. 270.

3. I am aware that in
F.C. of T. v. Western Suburbs Cinemas Ltd. (1952) 86 C.L.R. 102 , Kitto J. observed (at p. 108), by way of what appears to be a statement of general principle, that ``the capital or income character of expenditure actually incurred depends upon the nature of the purpose for which it was incurred''. Yet it seems to me, in spite of that observation, that what was said later by his Honour in the Broken Hill case (supra) imparts to demolition expenses, for all practical purposes, what I might describe as an ``absolute'' capital character.

4. Even if one was of the opinion that there was no compulsion arising out of the Broken Hill case, I think that the assessment in this case is defensible on the basis of more generalized concepts. The taxpayer did seek to obtain a lasting benefit by demolishing the subject building, and the fact that the benefit is in a sense a negative one will not remove the capital character from the relevant expenditure. In this connection, I refer to the remarks of Kitto, Taylor and Menzies JJ. in
Foley Bros. Pty. Ltd. v. F.C. of T. (1965) 13 A.T.D. 562 at p. 563 , where their Honours said:

``We need not discuss the appellant's contention that a reason for denying to the payment of the £ 38,750 the character of an outgoing of capital is to be found in the fact that the advantage it secured, being in substance negative, could never be reflected in a balance sheet. It is enough to refer to what was said by Dixon C.J. and Menzies J. in
John Fairfax & Sons Pty. Ltd. v. F.C. of T. (1959) 101 C.L.R. 30 at pp. 36, 48; 11 A.T.D. 510 at pp. 512 and 522 .''

5. My decision, accordingly, is that the objection should be disallowed and the Commissioner's assessment should be confirmed.