Case K34

Judges: HP Stevens Ch

CF Fairleigh QC

Court:
No. 1 Board of Review

Judgment date: 14 June 1978.

C.F. Fairleigh Q.C. (Member): The taxpayer, a proprietary company carrying on a bakery business, received a notice of assessment in respect of its return of income for the year ended 30 June 1974 with an adjustment sheet containing particulars as follows: -

Loss as returned                                                         $1,489

Deduct

Previous years losses claimed written back            $7,797

Portion of motor vehicle expenses considered

applicable to non-business usage                         104

Portion of depreciation on Holden car disallowed

considered not applicable to business use                342              8,243

                                                      Income              6,754

Deduct

Previous years losses now fully recouped

                              1970    1971    Total

Losses B/fwd               $2,466         $3,679         $6,145

Recouped                    2,466          3,679          6,145         6,145

                           ------         ------         ------

Balance C/fwd                Nil            Nil            Nil

                           ------         ------         ------         -----

                                        Taxable income                   $609

                                                                        -----

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2. The taxpayer objected thereto and the Commissioner decided to disallow the objection. That decision was referred to a Board for review.

3. The taxpayer's return of income for the year ended 30 June 1975 was adjusted as follows (and a notice of assessment issued accordingly): -

      Taxable income as returned           $  282

      Add

      Proportion of depreciation on

      Mercedes car $213 and motor

      vehicle running expenses $104

      disallowed being applicable to

      non-business use of the vehicles        317

      Loss on disposal of Holden car

      reduced from $225 to nil                225

                                            -----

                                              824

      Previous years losses reduced

      from $1,489 to nil                    1,489

                                            -----

                                            2,313

      Deduct

      Depreciation allowed on

      disposal of Holden car to date

      of sale less proportion

      applicable to non-business use          177

                                           ------

      Taxable income                       $2,136

                                           ------

Note: There is no assessable income as a result of the disposal of the Holden car.

4. The taxpayer objected thereto and the Commissioner decided to disallow the objection. That decision was referred to a Board for review.

5. The taxpayer's return of income for the year ended 30 June 1976 was adjusted as follows (and a notice of assessment issued accordingly): -

      Taxable income as returned          $4,872

      Add

      Deduction for running

      expenses $104 and depreciation

      to the extent of $378 disallowed

      be applicable to non-

      business use of the vehicles           482

                                          ------

      Taxable income                      $5,354

                                          ------

6. The taxpayer objected thereto and the Commissioner decided to disallow the objection. That decision was referred to a Board for review.

7. The notice of objection against the assessment for the first of the years in issue as made by the taxpayer's public officer (and director) contains the following paragraphs: -

A company which is carrying on business and has no other function cannot expend anything for its private purposes simply because by its nature it has no private life. The same applies to the argument that part of the car expenses and car depreciation of a company carrying on a business which is not applicable to business. It may have expenditure of a capital nature but car running expenses and depreciation are not capital expenditure.
If the Deputy Commissioner maintains that part of the expenses arose by the fact that one or more of its employees use the car for their private purposes, the expenses will still be a business expense for the company as is any other benefit allowed to its employees.
I also wish to point out that no director or other employee used any car or truck for his private purposes. The manager and director had to spend his nights in the factory of the company and no car is used for travelling by anybody from work to his home. For a considerable period the manager/director (myself) and his family lived in the same building and there was no possibility of travelling by car to or from home.
It is not maintained by the Deputy Commissioner that any car of the company was used without consideration by others than employees of the company as in fact that was and is not the case. Therefore the cars were used exclusively for the purpose of gaining or producing assessable income or are necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income. It may be a benefit given to an employee but it is still not private expenditure or a non business expenditure, whatever is meant by this expression.

8. The notice of objection against the assessment for the second of the years in issue contains some of those paragraphs and a fourth paragraph: -

The past losses disallowed arose out of the grounds viz. that part of the car expenses were disallowed. Objection against the 1974 assessment (the first since 1970) is pending and should be considered together with this present objection.

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9. The notice of objection against the assessment for the third of the years in issue contains, apart from a formal paragraph, two paragraphs as follows -

The grounds on which I rely are that all car expenses and the full amount of car depreciation are expenses necessarily incurred in carrying on the business of the company. (S. 51)
There are objections on the same grounds for the year ended 30.6.1975 and 1974 and involves years ended 1973 and 1972, 1971 and 1970, when the company had losses. The objections should be dealt together.

10. All three notices may be understood as comprehending the same grounds. However there has not been and, of course, there could not be a consolidation, even though the references have been heard together. The parties are entitled to separate formal decisions on each reference.

11. The contention in the first ground of the first notice of objection (para. 7 hereof) can be disposed of immediately. It is of no consequence that an incorporated body cannot make any use of a motor vehicle except by human agency. An argument based thereon would be self-defeating, because, if accepted, there would be no use by the incorporated body so as to sustain any claim in the return in respect of outlays incurred in the use or even in the ownership of the vehicle, e.g., for depreciation.

12. Furthermore one basis of the taxpayer's contention is to be understood as meaning that if any employer, whether incorporated or not, permits (or places no obstacle in the way of) the employee using the vehicle in the employee's own off-time for the employee's own purposes then the vehicle is during those times and on those occasions being driven on the employer's behalf.

13. That proposition is contrary to an unbroken line of common law cases dealing with the liability of the vehicle owner where there is a relationship of master and servant or of principal and agent, and the vehicle whilst being driven by the employee or agent for his own purposes and not in the course of his employment or agency causes damage to the property of others. Cases based on statutory liability arising from say compulsory third party insurance of motor vehicles are different; though even in this sphere the principle may perhaps be found to apply that if e.g. a husband is driving his wife's car on a frolic of his own (a ``pub crawl'') the car owner is not vicariously liable for the negligence of the driver (
Launchbury v. Morgans (1973) A.C. 127 ;
Saif Ali v. Sydney Mitchell & Co. (1978) 1 Q.B. 95 at p. 103 ).

14. Halsbury 3rd Ed. Vol. 25 Master and Servant pp. 541-542 para. 1029 sets out the principle: -

In order to render the master liable for the act of the servant it is necessary to show that the servant in doing the act which occasioned the injury was acting in the course of his employment. A master is not liable if the act which gave rise to the injury was an independent act unconnected with the servant's employment. If at the time when the injury took place the servant was engaged, not on his master's business, but on his own, the relation of master and servant does not exist, and the master is not therefore liable to third persons for the manner in which it is performed, since he is in the position of a stranger. In this case it is immaterial whether the servant is using the master's property with his master's permission so long as he is clearly acting on his own behalf or whether he is using it surreptitiously and is, therefore, as regards this master, a trespasser. Where, however, the servant whilst using his master's property in the course of his employment, embarks upon business of his own, and the injury is occasioned afterwards, the liability of the master continues, unless the servant in deviating from the business which he was engaged to perform, can no longer be considered to be acting in the course of his employment, and must be regarded as engaged in a separate transaction.

See further the cases contained in the Australian Digest 2nd Ed. Vol. 26 title Master and Servant part III divisions 87 to 90 and 96; Vol. 29 title Negligence part VII division 51.

15. The taxpayer's submission includes a discussion of the effect of sec. 109 of the Act (payments to shareholders and directors in excess of an amount which the Commissioner considers reasonable). The Commissioner has made no reference to sec. 109. I also regard sec. 109 as not arising on the present issues.

16. The significant parts of the presently material sections of the Act are these: -

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sec. 51(1) - All losses and outgoings to the extent to which they are incurred in gaining or producing the assessable income, or are necessarily incurred in carrying on a business for the purpose of gaining or producing such income, shall be allowable deductions...
sec. 54(1) - Depreciation during the year of income of any property, being plant, or articles owned by the taxpayer and used by him during that year for the purpose of producing assessable income... shall subject to this Act be an allowable deduction.
sec. 59(1) - Where any property of a taxpayer, in respect of which depreciation has been allowed or is allowable under this Act... is disposed of... at any time during the year of income, the depreciated value of the property at that time less the amount of any consideration receivable in respect of the... disposal... shall be an allowable deduction.
(2) - If that consideration exceeds that depreciated value, the excess, to the extent of the sum of the amounts allowed and allowable.. in respect of depreciation shall... be included in his assessable income of that year.
sec. 61 - Where the use of any property by the taxpayer has been only partly for the purpose of producing assessable income only such part of the deduction otherwise allowable under sec. 54 or sec. 59 in respect of that property as in the opinion of the Commissioner is proper shall be an allowable deduction.
sec. 62(1) - In this Division ``depreciated value''... means the cost of the unit to the person who owns or owned the property at that time less the amount of depreciation (if any) allowed or allowable in respect of that unit in assessments of the income of that person for any period prior to that time...

17. Subsequent to making the request for reference of the 1976 issue to the Board the public officer (director/manager) of the taxpayer wrote to the Commissioner as follows: -

I... hereby state that I accept the quantum of depreciation, loss on sale and running expenses of motor cars calculated by the Commissioner as applicable to the use of such cars for my private purposes provided the quantum is not increased by the Commissioner.
Consequently the sole issue before the Board of Review will be whether such quantum of depreciation, loss on sale and running expenses are allowable deductions ( scil . in) ascertaining the taxable income of the company for each of the relevant years of income.

If that letter was intended to forecast that there would be no dispute on questions of fact (leaving aside quantum) it proved to be a false omen.

18. At the hearing the parties tendered an agreed statement of facts to the following effect: -

(a) The taxpayer company was incorporated in New South Wales on 29 September 1961.
(b) It is a family company whose sole shareholders and directors are a master baker and his wife; he was also manager and she was also shop assistant and clerk.
(c) During each of the years in issue motor vehicles (other than panel vans) owned by the taxpayer were used solely by the husband partly in connexion with the running of the bakery business (50%) such as visiting customers, flour mills and the bank, and partly for his own private uses (50%).

19. The taxpayer's representative (its accountant) tendered to the Board a submission on law. As this contained some factual matters he then called the director/manager as a witness. With some problems due to language difficulties he set out to prove that: ``(the director/manager) as the only master baker employed by the taxpayer working from the very early hours of the morning until late in the afternoon was doing this work under a tacit agreement part of which was the use of a car by (him). Being part of his remuneration... If (he)... had not done the work somebody else had to be employed and probably higher wages had to be paid.''

20. The evidence in chief of the director/manager (with the answers given by the director/manager's son as interpreter) is as follows: -

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Q. When you started the bakery in 1961, have you had the use of the car for your private purposes since the beginning of the business?
A . Yes.
Q . From the beginning you regarded the use of the car as part of your salary or remuneration?
A . I use the car sometimes because the salary is down, it is very low.
Q . Do you regard it as part of your remuneration?
A . Yes.
Q . When did you think of this, to make such an agreement to use the car? Was it in the sixties and then it went on for years or was it at a certain date in 1969 when the taxation department started to tax this private use?
A . Roughly in 1969.
Q . Can you remember that in 1974 your personal income tax return showed that you have the use of the car and you put away $260 and that amount was taxed by the taxation department?

At this point an objection was taken by the Commissioner's representative with submissions from each side and the taxpayer's representative concluded (with no further evidence in chief): -

I would use this ( scil . carbon copy of director/manager's return of income) as an indication that there was such an agreement because he included the benefit of the car as part of his salary or remuneration. It was in 1974. The reason why I did not include it in the following years was because the taxation department followed the practice and he was actually taxed twice in the following years but the fact that he has it in his return shows that there was an agreement.

The Chairman then said: -

I do not think it shows that there was an agreement, but I will allow you to have the information in and I do not think (the Commissioner's representative) would object to the information that in 1974 (the director/manager) returned a figure for the value of the car.

(In fairness to the accountant it should be mentioned that English is not his native language and it is not known whether or not he can converse in the language of the director/manager.)

21. The cross-examination of that witness (with the aid of the same interpreter) is as follows: -

Q . During each of the years ended 30 June 1970 to 1976 was your wife also a director of the company?
A . Secretary of the company.
Q . Was she also a director?
A . Director, yes.
Q . Were any discussions held at any meetings of directors regarding the use of the company car by you?
A . Yes.
Q . There were discussions?
A . Yes.
Q . What was the outcome of those discussions?
A . The fact that my salary was rather low and we decided that I could use the car especially on week-ends because we have been living since 1969 at that address ( scil . where the bakery is) and we only went to the address ( scil . in another suburb) on week-ends now and then and we have always been living in ( scil . that street where the bakery is). So the use was only restricted (semble applicable) to week-ends.
Q . Was there any record of the minutes of meetings relating to these discussions?
A . No.

There was no further evidence.

22. The address of the Commissioner's representative included the passage: ``... there is no evidence before the Board to support the proposition that the granting of the use of the car to (director/manager) for his own private purposes was to form part of his remuneration, and the onus of proof has, accordingly, not been discharged.''

23. The statutory onus (sec. 190(b)) is on the taxpayer to prove that the assessment is excessive. It is oft-times said that there is no onus on the Commissioner. However when a

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taxpayer has given credible evidence which supports his case (and here the substantial part arises from cross-examination) there is, from an evidentiary point of view, an onus upon the Commissioner to produce contrary testimony, for otherwise the taxpayer has succeeded in discharging the statutory onus. I appreciate that a dichotomy of statutory onus and evidentiary onus is as unsatisfactory as that of evidential uncertainty and conceptual uncertainty (In
re Tuck's Settlement Trusts (1978) 2 W.L.R. 411 at pp. 415-417 ) but it will serve well enough for present purposes. When the facts have been ascertained (to the extent that the respective representatives present the facts to the Board) and all that remains is the resolution of a question of law, neither party thereupon carries any onus of proof (
Briers v. Atlas Tiles Ltd. 78 ATC 4017 at p. 4031 ).

24. Once the subject was opened up by cross-examination the effect of the evidence (when left at the point of the answer to the question ``What was the outcome of the discussions'') was this: The arrangement was ``tacit'' until about 1969 but thereafter it was expressed orally though not in detail. The elements of the arrangement so far as explicit are these:

(i) An acknowledgment by the co-director that the manager/director's salary was rather low.
(ii) Consequent upon (i) an agreement by both directors (which is only explicable as an informal company directors' resolution cf. 51 A.L.J. 587) that the manager/director could have the use of the car outside his working hours, especially at the week-ends.

25. This falls short of proof of all the matters as in para. 19 hereof. However a case frequently falls short of counsel's opening address without it being fatal to his cause provided that credibility is not put in issue. I do not underestimate the difficulties of cross-examining through an interpreter who is a close relative of the witness and who makes all the predictable errors of the novice interpreter, e.g., whispered conversations with the witness and at times monosyllabic answers in English following upon such discussions in the foreign language. However in the present instance the Commissioner's representative has not suggested that the witness was untruthful and so it is necessary to comply with the directions of the House of Lords in
Browne v. Dunne (1894) 7 C. & P. 408 : -

Lord Herschell L.C.: ``It seems to me to be absolutely essential to the proper conduct of a cause, where it is intended to suggest that a witness is not speaking the truth on a particular point, to direct his attention to the fact by some questions put in cross-examination showing that that imputation is intended to be made.... I mean upon a point on which it is not otherwise perfectly clear that he has had full notice beforehand that there is an intention to impeach the credibility of the story which he is telling... (unless) the point upon which he is impeached... is... manifest.''
Lord Halsbury : ``To my mind nothing would be more absolutely unjust than not to cross-examine witness upon evidence which they have given, so as to give them notice, and to give them an opportunity of explanation, and an opportunity very often to defend their own character, and not having given them such an opportunity, to ask the (tribunal) afterwards to disbelieve what they have said, although not one question has been directed either to their credit or to the accuracy of the facts they have deposed to...''

26. I share the concern expressed by the Chairman as to the paucity of evidence (cf.
Mead Packaging (Aust.) Pty. Ltd. v. Commr. of Pay-roll Tax (N.S.W.) 78 ATC 4164 at p. 4172 ;
R. v. Kensington Rent Officer ex parte Noel (1978) 1 Q.B. 1 at pp. 6, 10 ). But the Board has no inquisitorial powers for it is not a Court of Star Chamber. It takes its place as an administrative tribunal with a quasi-judicial function in the adversary system, even though the Commissioner is only nominally a party. This does not gainsay the fact that the uncontradicted evidence even of an independent expert witness is not accepted as of course, and regard must be given to the quality and weight of the evidence (
Walton v. The Queen (1978) 1 All E.R. 542 P.C. ): thus it is always necessary to consider whether evidence is convincing ( ibid ). In the present case I see no reason to discount the evidence for any of these factors. In brief the position is that the Board has to decide the case as a question of the right conclusion to draw from the whole of the evidence (cf. the joint judgment of Williams A.C.J., Kitto and Taylor JJ., in
Martin v. F.C. of T. (1952-1953) 90 C.L.R. 470 ). In deciding what is the right conclusion I apply
Briginshaw v. Briginshaw (1938) 60 C.L.R. 336 at pp. 360-361 for an

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issue in a civil matter, viz., whether the evidence produces a mere preponderance of assent in favour of either party's proposition. In one sense I am applying the principle that one looks at the substance of the transaction and not mere words (
I.R. Commrs. v. Duke of Westminster (1936) A.C. 1 at pp. 20-21 ;
Pritchard v. Briggs (1978) 1 All E.R. 886 at p. 906 ).

27. In
Tweddle v. F.C. of T. (1942) 7 A.T.D. 186 at p. 190 Williams J. said: -

It is not suggested that it is the function of income tax Acts or of those who administer them to dictate to taxpayers in what business they engage or how to run their business profitably or economically.

28. Yet whilst an employer is entitled to pay an employee or provide the employee with such benefits as the employer may see fit, nonetheless sec. 51(1) permits a deduction to the employer only of sums expended by the employer in the course of earning the employer's assessable income (to express sec. 51(1) compendiously). Therefore whenever sums paid to employees (or benefits granted to employees) are in part for services rendered and in part payments unconnected with their services (particularly in the case of a family company) sec. 51(1) requires that an apportionment be made.

29. In
Johnson Bros. & Co. v. I.R. Commrs. (1919) 2 K.B. 717 the argument for the employer (at p. 720) was that the Special Commissioners were not entitled to say that the employer (the father) need not have paid to the employees (the sons) the sums in issue; that the father doubtless considered that the sons, having for some years had only a small salary, should now have larger salaries based on the success of the business; and that the moment it is seen that the money was paid under a bona fide agreement for the sons' remuneration then the money must be treated as salaries which were wholly and exclusively laid out or expended for the purposes of the business. Counsel for the respondent argued that two elements entered into the payments to the sons, first a payment for services rendered, and secondly a payment on sentimental grounds; and the latter had to be eliminated as the Commissioners had done in accordance with the evidence by splitting up the amounts and saying how much should be allowed as the true remuneration for the services actually performed by the sons. Counsel for the employer made the rejoinder (unsuccessfully) that the fact that sentiment may to some extent have influenced the payments is immaterial; and that it is enough if the payments were made under a bona fide arrangement.

30. Rowlatt J. (at p. 721) agreed that the arrangement was perfectly bona fide - ``for in 1910 there was no thought of the imposition of an excess profits tax''. Before 1910 the three sons were employed by their father at salaries but the business having prospered for a period which began shortly before World War I, the agreement was made whereby instead of paying salaries to his sons the father gave them a share of profits, without making them partners. (There is a similarity with the present reference of a ``tacit'' agreement, i.e., the arrangement was tacitly renewed.) Rowlatt J. held that the Special Commissioners were entitled to proceed as they did, i.e., to eliminate such part of the sums paid as was considered to arise from the family relationship and allow as a deduction only such amount as represented proper remuneration for services performed by the employees.

31. So also in
Copeman v. Flood (William) & Sons Ltd. (1941) 1 K.B. 202 where in the accounts of a private company (the directors of which, who were members of the same family, owned all the shares) 2,600 pounds sterling were charged as the remuneration in respect of a period of between three and four months of one of the directors, a daughter aged 17 years, who had no previous business experience and rendered some unskilled and inconsiderable services to the company; and a similar sum of money was charged as the remuneration for a year of another director, a son aged 24 years, who had worked in the business for seven years with the main duty of calling on farmers to buy pigs from them. Lawrence J. accepted the proposition that the Special Commissioners could not interfere with the right of the company to pay such remuneration to the directors as it thought fit. He held that it was the duty of the Commissioners to direct their minds to the question of remuneration wholly and exclusively laid out or expended for the purposes of the company's trade. Therefore Lawrence J. remitted the case to the Commissioners to find as a fact whether the sums in question were so laid out and expended for the purposes of the company's trade and, if not, to find how much of those

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sums was so laid out or expended. (See further
I.R. Commrs. v. George Guthrie & Son (1952) 33 T.C. 327 at p. 330 ;
Ben-Odeco Ltd. v. Powlson (1978) 1 All E.R. 913 at p. 917 .)

32. The approach of Rich J. to this problem in
Robert G. Nall Ltd. v. F.C. of T. (1936-1937) 57 C.L.R. 695 at p. 699 in a case arising under the superseded Act is similar. Thus he commenced one sentence: ``If the company were guided solely by business considerations...'' The decision was affirmed on appeal.

33. In
F.C. of T. v. Snowden & Willson Pty. Ltd. (1958) 99 C.L.R. 431 Dixon C.J. at p. 437 referred to
Ronpibon Tin N.L. and Tongkah Compound N.L. v. F.C. of T. (1949) 78 C.L.R. 47 in respect of the phrase ``clearly appropriate or adapted for'' and said: -

What is meant by the qualification is that the expenditure must be dictated by the business ends to which it is directed, those ends forming part of or being truly incidental to the business.

34. The phrase ``truly incidental'' as used by Dixon C.J. is not without its difficulties. The word ``incidental'' can mean ``inessential'' (
Hollyock v. F.C. of T. 71 ATC 4202 at p. 4206; (1971) 125 C.L.R. 647 at p. 657 ;
Bayly v. F.C. of T. 77 ATC 4045 at p. 4056 ); or something occurring or liable to occur in fortuitous or subordinate conjunction with something else of which it forms no essential part (
State of Victoria v. The Commonwealth and Hayden (1975) 134 C.L.R. 338 at p. 414 ). Presumably Dixon C.J. in Snowden & Willson intended something less than ``essential'' in the sense of ``indispensable''. There is nothing to be gained in endeavouring to construe a sentence in a judgment as though it were a clause in a statute. Possibly ``incidental'' means something like ``consequential or supplementary'' as considered in Re Freeston's Charity (1978) 1 All E.R. 481 at p. 489. ``Incidental'' is susceptible of so many shades of meaning that it should possibly be taken (to adopt an expression of the House of Lords in another context) as merely rounding off a phrase. The addition of the word ``relevant'' obviously neither enhances nor detracts from the meaning which is given to ``incidental''. Relevancy merely enables something to be admitted into evidence.

35. There are problems in the application of the principle as in Snowden & Willson and in Ronpibon whenever a court or tribunal is concerned with a husband and wife proprietary company which is analogous to a partnership (and is so regarded by the courts under the just and equitable winding up provisions, e.g., deadlock - Halsbury 4th Ed. Vol. 7 Companies para. 1001 note 11 at pp. 596-597).

36. Doubtless it is true that losses and outgoings incurred in carrying on a business are under normal circumstances incurred not out of necessity in its ordinary sense but as a matter of choice arising out of business prudence and judgment. That there is not an entirely free rein to the businessman is shown by the United Kingdom cases cited above and by the reasons of Latham C.J. in
W. Nevill & Co. Ltd. v. F.C. of T. (1936-1937) 56 C.L.R. 290 at p. 300; 4 A.T.D. 187 at p. 193 : -

But in order to justify a deduction... the outgoing in question must be actually incurred in gaining or producing the assessable income. The payments in question were actually made bona fide in the course of business in the interests of the efficiency of the business... (quoting with approval) ``A sum of money expended... voluntarily and on the grounds of commercial expediency and in order directly to facilitate the carrying on of the business''.

See further p. 301, p. 193: -

If the actual object is the conduct of the business on a profitable basis with that due regard to economy which is essential in any well-conducted business, then the expenditure (if not a capital expenditure) is an expenditure incurred in gaining or producing the assessable income.

37. Thus the ``choice'' of the businessman to incur expenditure which has the quality of sec. 51(1) deductibility is circumscribed. So also in
Herald & Weekly Times Ltd. v. F.C. of T. (1932) 48 C.L.R. 113 the joint judgment of Gavan Duffy C.J. and Dixon J. at p. 119 contains the phrase ``at any rate if unaffected by any considerations except those of profit and loss''. The oft-quoted passage from Ronpibon at p. 60 ``It is not for the Court or the Commissioner to say how much a taxpayer ought to spend in obtaining his income but only how much he has spent'' can only be understood in the light of the restrictions on choice laid down in so many High Court decisions. Furthermore in Ronpibon the joint

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judgment of Latham C.J., Rich, Dixon, McTiernan and Webb JJ. immediately follows that passage with a reference to the judgment of Ferguson J. in
Tooheys Ltd. v. C of T. (1922) 22 S.R. (N.S.W.) 432 at p. 440 in which it is said ``Of course it may still be a matter for inquiry whether the men were really employed in the business, or were merely put on the pay-roll as a device to swell the apparent expenses of the business but that is another matter.'' A passage in Tweddle at p. 190 which is similar to that in Ronpibon is referred to in Ronpibon and again is given in association with the judgment of Ferguson J. which contains the qualification. Neither the primary judgment nor the judgment on appeal in
Cecil Bros. Pty. Ltd. v. F.C. of T. (1962-1964) 111 C.L.R. 430 detracts from the test of what is ``truly allowable'', to adopt the phrase of Dixon C.J.

38. In
Hardie Investments Ltd. v. C. of T. (N.S.W.) (1946) 8 A.T.D. 43 Owen J. held that in the circumstances of the case before him the requirement of bona fides was satisfied where inter alia what was done was shown to be in accordance with prudent business policy and according to a recognized practice of company management and not for the purpose of defrauding the revenue (affirmed on appeal
C. of T. (N.S.W.) v. Hardie Investments Ltd. (1946) 73 C.L.R. 490 ; 8 A.T.D. 238 ). There are circumstances where it is prudent to negative mala fides early in the proceedings (
Marc A. Hammond Pty. Ltd. v. Papa Carmine Pty. Ltd. 28 F.L.R. 160 ).

39. So far as Nevill's case requires the Board to be satisfied on bona fides it seems to me that it is sufficient to say that there is no evidence of mala fides. Bad faith is never found to be present in the absence of evidence indicative of it (cf. the authorities summarized in Stroud's Judicial Dictionary also in Words and Phrases Legally Defined ). If the directors, even though the beneficiary of the arrangement is one of the two directors, agree (i) that the salary of the working manager is rather low (and the Commissioner produces no evidence to dispute it) and (ii) therefore that the company's car be available to him at week-ends, then that seems to me to meet all the tests in Nevill , once good faith is accepted as proved; nor do I see why the arrangement as deposed to have been made should be regarded as falling short of being ``dictated by the business needs to which it is directed''.

40. An arrangement which enables the employee to have the use of the employer's vehicle for the employee's own purposes outside working hours relates to (or for present purposes may be assumed to relate to) the payment by the employer for all such things as -

(a) the purchase price of the vehicle;
(b) the registration and insurance of the vehicle;
(c) petrol, oil and servicing of the vehicle;
(d) replacement of parts of the vehicle;
(e) repairs to the vehicle;
(f) garaging and cleaning of the vehicle.

41. Consequent upon the findings of fact as in para. 39 hereof I would hold as a matter of law that all payments by the company/employer of the type set out in para. 40 hereof come within the positive limbs of sec. 51(1) (and are not covered by the exclusions set out in the sub-section).

42. The operative phrase in sec. 54(1) is ``used by him'' (by virtue of definitions meaning used by the taxpayer/company). It is my opinion that if the employment arrangement is that the vehicle is available for use (and is used by) the employee in off-times then such use does not become different from use by the taxpayer/company within the meaning of sec. 54(1). (Regardless of the common law position vide paras. 13 and 14 hereof.) Compare
British Motor Syndicate v. Taylor (1900) 1 Ch. 577 ,
Shell-Mex & B.P. Ltd. v. Clayton (1955) 3 All E.R. 102 at p. 117; (1956) 3 All E.R. 185 at pp. 191, 195, 196 ;
Guinea Airways Ltd. v. F.C. of T. (1949-1950) 83 C.L.R. 584 .

43. The corollary is that sec. 59, 61 and 62 are to be understood in the same sense as that set out for sec. 54(1).

44. I would hold that the taxpayer's basal contention is correct in principle and the several assessments now under review should be amended accordingly.

Claim allowed

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