Case H30

Judges: FE Dubout Ch
N Dempsey M

P Gerber M

Court:
No. 3 Board of Review

Judgment date: 21 July 1976.

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Dr. P. Gerber (Member): In this matter I have had the advantage of reading the reasons of my colleague Mr. Dempsey, and agree with his clear exposition of the facts and his reasons for concluding that the deductions claimed in the years ended 30th June, 1968 and 1969 were properly disallowed. The extent of the activity carried on by the taxpayer in the years 1968-1969 were at all relevant times so minimal, that I am quite unable to identify the ``carrying on (of) a business'' or the engaging in ``primary production''. I further agree that the items claimed respectively as:

      Interest paid ........... $1,134.00

      Audit Fees .............. $  267.60

      Printing and Stationery...$   61.02

      Bank Charges .....        $   31.45

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                                $1,494.00

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were properly deductible under sec. 51, having regard to the nature of the taxpayer's business activities carried on for part of the year ending 30th June, 1970.

2. Turning to the two items, viz., ``Borrowing Expenses $475'' and

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``Depreciation of typewriter $10'' claimed as deductions in the year ended 30th June, 1970, I would like to add some brief remarks of my own.

3. The issue of allowability or otherwise of these two items comes in as a threshold question, since neither item, as ``pleaded'' in the Notice of Objection, properly raises the basis upon which they could be upheld.

4. The Notice of Objection, dated 27th March, 1972, is in these terms: -

``I, John Doe, being the Public Officer of the taxpayer, hereby object to the disallowment (sic) of expenses claimed in respect of the years 1968, 1969 and 1970 and notified by assessment dated 15th February, 1972.

The expenses disallowed are in my opinion properly allowable under either sec. 51 or sec. 75 of the Income Tax Assessment Act and were necessarily incurred in carrying on business for the purpose of gaining or producing assessable income.''

5. In the result that has occurred, it is perhaps not out of place to remind taxpayers and their advisers of the two relevant sections of the Act which enable a taxpayer dissatisfied with an assessment, to appeal therefrom.

6. Section 185 provides that a taxpayer so dissatisfied

``may, within sixty days after service of the Notice of Assessment, post to or lodge with the Commissioner an objection in writing against the assessment, stating fully and in detail the grounds on which he relies.''

Section 190 provides that:

``Upon every such reference or appeal -

• (a) the taxpayer shall be limited to the grounds stated in his objection.''

7. Similar wording to sec. 190 has been held to be:

``A positive statutory provision that upon appeal, the taxpayer is limited to the grounds set out in the objection. This we regard as an imperative direction to the Court, not as a provision merely for the benefit of the Commissioner, which he is in a position to waive. The provision is made for the purpose of protecting public revenue, and the Court is bound to give effect to it.''

(
Molloy v. F.C. of Land Tax (1938) 59 C.L.R. 608 , 610 ). Whilst it may be unfortunate that one must look at grounds of objection as though they constituted strict pleadings, nevertheless, the Full High Court in
Archer Bros. Ltd. v. F.C. of T. (1952-1953) 90 C.L.R. 140 , 149; 10 A.T.D. 192 , after citing Molloy's case (supra) with approval, went on to quote Williams J. in H.R.
Lancey Shipping Co. Pty. Ltd. v. F.C. of T. (1951) A.L.R. 507 ; 9 A.T.D. 267 :

``The grounds of objection need not be stated in legal form, they can be expressed in ordinary language, but they should be sufficiently explicit to direct the attention of the Commissioner to the particular respects in which the taxpayer contends that the assessment is erroneous and his reasons for this contention.''

8. As mentioned before, it is clear, that looking at the objection, neither of the above deductions come within the ambit of sec. 51 and/or 75 as alleged or at all. Whether interpreted ``technically, narrowly or with rigidity'' (
A.L. Campbell & Co. Pty. Ltd. v. F.C. of T. (1951) 82 C.L.R. 452 , 461 ) or whether approached ``liberally'', this case is not one where there could be some doubt whether the relevant grounds of objection have been included or not, so that the taxpayer could be given the benefit of any ambiguity. In the instant case, the objection has simply not been raised at all. Is such an omission fatal?

9. The cases on the adequacy or otherwise of the objections are too numerous to recite here. In the main, they deal with the question whether the arguments advanced on appeal can, somehow, be fitted into the stated grounds, and it becomes a matter of interpretation whether the grounds, as pleaded, were sufficient in their particularity to enable the Commissioner to gather from the written objections that he was being asked to apply his mind to any such contention (cf.
F.C. of T. v. Western Suburbs Cinemas Ltd. (1952) 86 C.L.R. 102 , 106-107 ). The instant case is different because, in essence, the Board is asked to write in, so to speak, two grounds which were never advanced by the taxpayer in his Notice of Objection at all. These omissions are obviously accidental, since those who prepared taxpayer's return, must have been keenly alive to the fact that the depreciation claim, to be an allowable deduction, must be claimed under sec. 54; likewise, the borrowing expenses can only be allowable if they fall within the provision of sec. 67.

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10. The claim for these deductions was obscurely set out in the taxpayer's return, and the Commissioner would have had some difficulty in determining on what basis the deductibility was sought. In these circumstances is this a case where one can apply the Moorcock principle? ( The Moorcock (1889) 14 P.D. 64.) In other words, is it proper for a Board to fill in what is left to be implied and need not be expressed as something so obvious that it goes without saying, so that if, while the Commissioner was contemplating the objection, an officious assessor were to suggest that sec. 54 and 67 could profitably have been included, he would testily suppress him with the comment: ``Oh, of course.'' Put in another form: Does the translation of an objection into a number corresponding to a section of the Act constitute a ``ground'' so as to satisfy sec. 185? If so, can the ``slip rule'' apply to cure the defect?

11. After some reflection, I have come to the conclusion that, sitting as a member of a Board of primary review, I would not be justified in permitting taxpayer the indulgence of ``amending'' his grounds at the hearing. I adopt the wording of Mr. Gibson (Chairman) in an earlier decision where he said: ``The legislature has not seen fit to repose in the Commissioner or a Board or a Court, the dispensative functions of inventing or allowing grounds which are not discoverable from the terms of the objection.'' ( Case C25,
3 T.B.R.D. )

12. In the result, although I am satisfied that the two items, viz., ``Depreciation of Typewriter'' and ``Borrowing Expenses'' would have been allowed if the 1970 return had been more specific in the separation of the expenses incurred in ``primary production'' and the letting of other property acquired in that year, and furthermore that such an omission was still curable by a Notice of Objection, in the instant case, the Notice sought to achieve an economy of language at the expense of illumination. It is therefore not for a Board of Review to cure such defects of drafting.

13. For these reasons, I am of opinion that the assessment for the year ended 30th June, 1970 should be reduced by deleting from the taxable income of the taxpayer, the amount of $1,494.

Claim allowed in part