Williams Property Developments Ltd. v. Commissioner of Inland Revenue.

Members:
Richmond P
Woodhouse J
Cooke J

Tribunal:
Court of Appeal (New Zealand)

Decision date: Judgment delivered 19 March 1980.

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Richmond P.

The appellant, Williams Property Developments Limited, is one of a number of companies comprised in ``the Williams Group''. I shall refer to it as ``the Property Developments Co.''. Another member of the group was called ``Williams Parking Centre Limited''. It later changed its name to ``Williams City Centre Limited'' but I shall refer to it as ``the Parking Centre Co.''. Both the Property Developments Co. and the Parking Centre Co. were wholly owned subsidiaries of Williams Development Holdings Ltd. I shall refer to that company as ``the Holding Co.''. The evidence does not disclose just what other companies were in the Williams Group although reference is made to Williams Construction Company Limited, to which I shall refer as ``the Construction Co.''.

In August 1967 the Property Developments Co. purchased for the sum of $48,000 a property known as No. 4 Gilmer Terrace, Wellington. Towards the end of the year 1970 the building on this land was demolished and the land was transferred to the Parking Centre Co. at book value. The respondent (``the Commissioner'') considered that the property had been sold to the Parking Centre Co. at a price which was $82,808 less than the market price or true value. He also considered that this land was ``trading stock'' within the definition of that expression contained in sec. 102(3) of the Land and Income Tax Act 1954 whereby the term ``trading stock'' included any real property ``where the business of the person by whom it is sold or disposed of comprises dealing in such property or the property was acquired by him for the purpose of sale or other disposal''. The effect of sec. 102, put very briefly, was to deem the sale to have taken place at market value for tax purposes. In the present case the Property Developments Co. had returned a loss of $46,987 for the year ended 31 March 1971. As a result of adding in the additional $82,808 this loss was turned into a profit and the Commissioner assessed tax amounting to $8,212.31.

Mr. A.G. Little, a taxation consultant, was advising the Williams Group at that time. On 18 July 1973 he wrote a letter objecting to the assessment of the Property Developments Co. on the basis which I have just described. Subsequently he wrote a further letter on 21 December 1973 specifically stating that sec. 102 of the Act had no application because the Property Developments Co. was not a dealer in property nor had the property at No. 4 Gilmer Terrace been purchased for the purpose of sale. He formally requested that the company's objection to the assessment be referred to the Board of Review. Subsequently a case was stated and the case was heard in February 1975 by the Taxation Review Authority (``the Authority'') at Wellington. At that hearing fairly extensive viva voce evidence was given by Mr. G.J. Bringans who described himself as the General Manager and a director of the Williams Group of companies. Evidence was also given by Mr. A.D.P. Williams, the Managing Director of the group. The Authority delivered a reserved decision on 27 March 1975. His reasons for judgment are reported as Case B2
(1975) 2 NZTC 60,011 . He was satisfied that the property at No. 4 Gilmer Terrace had been acquired by the Property Developments Co. for the purpose of sale to the Parking Centre Co. and accordingly that the case was covered by the second limb of the definition of ``trading stock'' to which I have already referred. He found it unnecessary to decide whether the circumstances also brought the case within the first limb of that definition.

The Property Developments Co. then appealed to the Supreme Court pursuant to sec. 43 of the Inland Revenue Department Act 1974. The case on appeal was heard by Jeffries J. in March 1977. The appeal was both on fact and law and the Judge was invited by both counsel to make a finding as regards the applicability of the first limb of the definition of ``trading stock''. He decided that the Authority had correctly held that the property at No. 4 Gilmer Terrace had been acquired by the Property Developments Co. for the purpose of sale to the Parking Centre Co. He went on to hold that the sale to the Parking Centre Co. was also caught by the first limb of the definition. This judgment is reported as
Williams Property Developments Ltd. v. C. of I.R. 77 ATC 6036 .

The present appeal is from the foregoing judgment of Jeffries J. and is brought pursuant to sec. 45 of the Inland Revenue Department Act 1974. Counsel are agreed

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that under that section the appeal is both on fact and on law. I propose to deal in the first place with the question whether No. 4 Gilmer Terrace was acquired by the Property Developments Co. for the purpose of sale or other disposal.

1. The relevant principles of law

At the outset it is convenient to refer to certain authorities which are of importance in relation to the issues which arise in the present case.

C. of
I.R. v. Walker [1963] N.Z.L.R. 339 was a decision of this Court regarding the proper interpretation of sec. 88(c) of the Land and Income Tax Act 1954 as it stood prior to amendment by sec. 9 of the Land and Income Tax Amendment Act 1973. Under sec. 88(c) assessable income was deemed to include all profits or gains derived from the sale or other disposition of any real or personal property ``if the property was acquired for the purpose of selling or otherwise disposing of it''. It will be seen that the words which I have quoted are substantially the same as those used in sec. 102(3) of the Act. The taxpayer had acquired land adjacent to his farm for the purpose of extending the area of his farm. It was also his intention to subdivide and sell off part of the land which he had acquired, as residential sections. The question was whether he had acquired the land, or the part of it which he intended to subdivide and sell, ``for the purpose of selling or otherwise disposing it''. The Court accepted that this question should be answered by reference to the taxpayer's dominant purpose. It was held by the majority of the Court that it was the dominant purpose of the taxpayer in buying the whole property which mattered and that was to enlarge the area of his farm. His intention to subdivide and sell some of the land was only an incidental step in fulfilment of his dominant purpose.

The next case to which some reference should be made is
Costello v. C. of I.R. (1966) 14 A.T.D. 358 . Mr. Costello was a builder. He and his wife owned the shares in a private company which had agreed to purchase a certain piece of land, with the intention of having a building erected thereon by Mr. Costello. There were financial difficulties with the Capital Issues Committee so Mr. Costello took a transfer of the land in his own name and then erected the building on it. He later transferred the land and building to the company at an undervalue and the Commissioner, in reliance on sec. 102, assessed tax on the amount of the undervalue. Tompkins J. held that on the facts of the case Mr. Costello had acquired the property for the express purpose of selling or disposing of it to the company in order to overcome the financial difficulties which had been experienced with the Capital Issues Committee. He rejected an argument that Mr. Costello's dominant purpose in acquiring the property was to overcome the difficulty in raising finance and was not to sell or dispose of it to the company. This decision was regarded by the Authority as binding on him in arriving at a decision in the present case.

Holden v. C. of I.R. 74 ATC 6021 is a decision of the Privy Council. It involved issues identical with those previously raised in C. of
I.R. v. Hunter [1970] N.Z.L.R. 116 . Taxpayers resident in New Zealand became entitled to sterling funds in the United Kingdom. They wished to convert those funds into New Zealand currency available in New Zealand. Their sharebroker instructed his London agent to buy United Kingdom securities with the sterling funds and simultaneously to sell them for New Zealand currency. The result was that the taxpayer received in New Zealand more New Zealand currency than he would have received if he had remitted his sterling funds to New Zealand through the banking system at the official rate of exchange. One of the questions for decision was whether the United Kingdom securities were acquired for the purpose of selling or otherwise disposing of them. As to this their Lordships said (74 ATC at pp. 6022-6023) -

``It is clear that the relevant enquiry is for what purpose was the property acquired, and, if there was more than one purpose, what was the dominant purpose (see
C. of I.R. v. Walker [1963] N.Z.L.R. 339 ). In the present cases it is not relevant to enquire what was the dominant purpose, since the only purpose for which the securities were bought was that they should, immediately, be sold. The appellants argued that this purpose was only incidental to the wider and more essential purpose, which each taxpayer set

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out to achieve, namely to remit funds from the United Kingdom to New Zealand but that, in their Lordships' opinion, is irrelevant. There can be only one answer to the question for what purpose the securities were bought, and the fact that the purchase and sale were part of a wider objective cannot affect that answer. Walker's case on its facts and ratio decidendi is clearly distinguishable from the present.''

The next case to which I shall refer is
Pascoe v. F.C. of T. (1956) 11 A.T.D. 108 . Fullagar J. had to decide, in terms of the relevant Commonwealth legislation, whether a particular property had been acquired ``for the purpose of profit making by sale''. The case was cited by Mr. Rabone because the judgment, at p. 112, recognises the possibility that a property may be acquired without any definite purpose in view at all. To the same effect is the judgment of Hogarth A.C.J. in G.
Williams v. F.C. of T. 74 ATC 4237 at p. 4250 . In that case it was held on the facts that certain shares had been acquired by the taxpayer with ``no particular purpose, but merely a vague general hope that the shares would be a good investment''.

Mr. Rabone and Mr. Mathieson were in agreement that the principles recognised in the cases to which I have referred were the relevant principles to be applied in the determination of the present appeal. The issue between them was as to the proper application of those principles to the facts. There was however one further legal issue raised in argument as regards which counsel were not in agreement. The question is as to the effect of sec. 36 of the Inland Revenue Department Act 1974, which replaced but is in the same language as sec. 20 of the Inland Revenue Department Amendment Act 1960. It provides -

``On the hearing and determination of any objection, the objector shall be limited to the grounds stated in his objection, and, subject to the provisions of subsection (2) of section 234 of the Land and Income Tax Act 1954, the burden of proof shall be on the objector.''

The issue is whether this section has the effect of requiring an objector to establish affirmatively (on the balance of probabilities) that his stated grounds of objection are correct. That is Mr. Mathieson's submission. Mr. Rabone, on the contrary, submits that if the taxpayer places all the relevant facts before the Court or other tribunal he will succeed in his objection, in a case such as the present one, if it appears that there is no material upon which it may properly be concluded that the property was acquired by him for the purpose of sale or other disposal. The latter view has been adopted by Barwick C.J. in relation to substantially equivalent provisions found in sec. 190(b) of the Commonwealth Income Tax Assessment Act but there is a sharp division of opinion on the point amongst the members of the High Court of Australia. The question has been discussed in
Gauci & Ors. v. F.C. of T. 75 ATC 4257 ,
McCormack v. F.C. of T. 79 ATC 4111 and
Macmine Pty. Ltd. v. F.C. of T. 79 ATC 4133 . In these cases Jacobs and Aickin JJ. have taken the same view as the Chief Justice. Mason, Gibbs, Stephen and Murphy JJ. have taken the view urged upon us in the present case by Mr. Mathieson. In his judgment now under appeal Jeffries J. set out (77 ATC at p. 6039) a lengthy extract from the judgment of Mason J. in the Gauci case . He preferred the view taken by Mason J. to that of the Chief Justice. I agree. I think that the ordinary and natural meaning of the New Zealand section is to require an objector to establish that one or more of the grounds of its objection are correct, even if this involves him in proving a negative, as is the position in the present case. I respectfully agree with the reasoning of Mason J. in the passage cited by Jeffries J. in the present case and with the reasoning of Gibbs J. in the McCormack case at
79 ATC p. 4121 -

``But it is not enough, even when all the facts are known, that there is no material upon which it may be concluded that the property was acquired for the purpose mentioned in sec. 26(a). If a taxpayer can succeed, simply because there is no evidence from which it can be concluded that the relevant purpose existed, that must mean that the burden of proving the existence of that purpose lies on the Commissioner. That in my respectful opinion would be to invert the onus of proof. The taxpayer will succeed if the proper inference from the evidence is that

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the property was not acquired for the relevant purpose, but if there is no evidence as to the purpose for which the taxpayer acquired the property the appeal must fail.''

2. The facts and the application of the law to those facts

At the time when No. 4 Gilmer Terrace was acquired by the Property Developments Co. a substantial area of adjacent land was owned by the Parking Centre Co. That property had been partly developed by the erection of a parking building and there were plans current for the development of the rest of the property by the erection of an office building. In evidence before the Authority Mr. Bringans, to whom I have already referred, explained that this office building had been designed and had received Town Planning approval. Its viability did not depend on the Group procuring any other properties. However there were three properties adjacent to the land owned by the Parking Centre Co. namely Nos. 2, 4 and 6 Gilmer Terrace. None of these were necessary purchases in order to enable the development of the Parking Centre Co. land at the rear of these three properties. However No. 2 Gilmer Terrace shared two boundaries with the Parking Centre Co. property and also shared a side boundary with No. 4 which in turn shared a side boundary with No. 6. The purchase of Nos. 4 and 6 would not in themselves add anything to the value of the property owned by the Parking Centre Co. but if No. 2 Gilmer Terrace could be purchased then the property of the Parking Centre Co. could be developed in some way or other in conjunction with Nos. 2, 4 and 6 Gilmer Terrace.

This was the situation when No. 4 Gilmer Terrace suddenly came on the market at a time when the plans for the erection of an office building on the existing Parking Centre Co. site had not actually been put into effect. Mr. Bringans said that generally there was a shortage of ready cash in the Group which would have preferred not to have had any commitments for the purchase of further land ``particularly as No. 2 Gilmer Terrace, which was a necessary purchase to make for part of the land to the rear, there was seemingly at that stage no possibility of purchase''. It was however decided that No. 4 Gilmer Terrace, which was a block of apartments let to residential tenants, could stand on its own feet more or less indefinitely. In other words the rentals (which were capable of being increased if the apartments were converted to professional or commercial suites) would cover expenses including the finance for purchase of the property. Mr. Bringans explained that because of the uncertainty as to whether and if so when the Group could acquire No. 2 Gilmer Terrace it was necessary for No. 4 to be capable of continuing use of the existing building or in the alternative of being developed on its own without any association with the adjoining land owned by the Parking Centre Co.

The other point of importance is that the Parking Centre Co. had already financed its development of its land by means of a debenture (or debentures) on terms that it would not encumber after-acquired properties by means of a second mortgage. There was no dispute on the part of Mr. Bringans or of Mr. A.D.P. Williams (Managing Director of the Group who also gave evidence) that but for this restriction on future borrowing the Parking Centre Co. would have been the logical member of the Group to purchase No. 4 Gilmer Terrace. However the purchase was made by the Property Developments Co. for reasons which were stated in Mr. Little's letter of 18 July 1973 to the Inland Revenue Department in the following way -

``I would first advise that this property was purchased by the company in August 1967 and was tenanted until October 1970 when the buildings were demolished and the land transferred to Williams Parking Centre Ltd. At the time of the purchase in 1967 the adjoining property was already owned by Williams Parking Centre Ltd. but as this company's debenture trust deed did not permit a second mortgage on after-acquired property it was necessary to finance the transaction by Williams Property Developments making the purchase instead of Williams Parking Centre.''

This letter from Mr. Little played a very prominent part at the hearing of the objection before the Authority. Mr. Blank, who appeared for the Commissioner, contended that the natural inference to be drawn from Mr. Little's letter was that No. 4

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had been purchased by the Property Developments Co. merely as a holding operation until such time as the difficulties referred to by Mr. Little were overcome whereupon the property would be transferred to the Parking Centre Co. He put this suggestion to Mr. Bringans in cross-examination and Mr. Bringans denied it. Mr. Bringans said that when the decision was made to purchase in the name of the Property Developments Co. it was not possible to form any definite decision as to the future ownership of the property. Basically this was because of the uncertainty surrounding the possible purchase at some stage of No. 2 Gilmer Terrace. There seems indeed to have been no reason why the Property Developments Co. should not continue the owner of the property while it was merely being rented. Indeed this is exactly what happened until after No. 2 Gilmer Terrace was acquired. The previous history of the Property Developments Co. shows that it was being used within the Group to own properties from which the Group was deriving rentals. It was however what Mr. Bringans called a ``shell'' company, a term which he explained that he used to describe a company which was not particularly operative, which was not operating on a day-to-day basis, other than receiving rents from properties, and which had no fully employed officers, and no letterhead. Its only officers were the secretary and directors.

Although Mr. Bringans denied that at the time of the acquisition of No. 4 Gilmer Terrace there was any definite decision or plan to transfer the property to the Parking Centre Co. the Authority appears to have rejected this evidence partly because of Mr. Blank's submissions as to the inference to be drawn from Mr. Little's letter and partly because the Authority regarded the evidence given by Mr. Williams as supporting the view that the purchase by the Property Developments Co. was merely a holding operation for the Parking Centre Co., as suggested by Mr. Blank. I am conscious of the disadvantage of not having heard and seen the witnesses give evidence but I confess to finding great difficulty in seeing how anything which Mr. Williams said in evidence can have had the effect ascribed to it by the Authority. It is true that Mr. Williams agreed that Mr. Little had stated the position correctly in his letter. But when he was asked whether the property was intended eventually to be transferred to the Parking Centre Co. he merely replied to the effect that ``We never see any real difference between one company and another. In our own group we see virtually all brothers and sisters in the one family''. He then went on to say that at the time of the purchase of No. 4 Gilmer Terrace he was not so farseeing as to see No. 4 Gilmer Terrace ultimately going into the total development of the site, but he acknowledged that ``it was very closely connected to the land we already owned''. It was in that context that he answered in the affirmative the question ``So that what Mr. Little says is basically correct?'' It seems to me that the evidence given by Mr. Williams tends to support rather than to contradict what Mr. Bringans said. In essence both these witnesses were acknowledging that the basic reason which persuaded them to purchase No. 4 Gilmer Terrace was its potential value as an adjacent property. But nothing Mr. Williams said contradicted the evidence given by Mr. Bringans as to the importance of No. 2 Gilmer Terrace in any future prospects of development in conjunction with the land already owned, or anything Mr. Bringans said as to the why no definite decision could be made at that time.

Now I should say something as to how No. 2 Gilmer Terrace came to be purchased. For reasons which are not clear from the evidence this property came on the market a good deal sooner than was evidently anticipated and the Property Developments Co. secured an option to purchase No. 2 in October 1968. Approximately 12 months later that option was surrendered in favour of the Holding Co. By that time there was a plan to utilise the whole site including Nos. 2 and 4 Gilmer Terrace for a hotel complex with a variety of other facilities incorporated in it. Mr. Bringans said -

``It was at the latter stages of the option on 2 Gilmer Terrace that it was surrendered in favour of Williams Development Holdings because it appeared at that date negotiations which were proceeding with Williams Development Holdings would not be the owner of the title. That was, I think, approximately 12 months after the option

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was first obtained and then within quite a short period of that decision having been made the whole development proposal evolved completely and the decision changed again where it became Williams Parking Centre, the owner of approximately 90 percent of the land can be used as the vehicle to own 2 and 4 Gilmer Terrace and be the owning company of a completed development.''

There appears to be an error in the transcript which counsel have suggested would be corrected by treating the second reference to the Holding Co. as a reference to the Property Developments Co.

Mr. Bringans went on in evidence to explain that later still the hotel project was abandoned and an expanded office and retail complex proceeded with. This project is known as the Williams City Centre and it was for that reason that the Parking Centre Co. later changed its name to Williams City Centre Limited. The Authority seems to have overlooked the passage in the evidence of Mr. Bringans which I have just set out because he observed that the evidence did not disclose the name of the company in whose favour the option to purchase No. 2 Gilmer Terrace had been surrendered. That error was in itself immaterial but suggests strongly that the Authority had overlooked Mr. Bringans' evidence to the effect that when the option was taken over by the Holding Co. it was evidently not contemplated that Nos. 2 and 4 Gilmer Terrace would be transferred into the ownership of the Parking Centre Co. This is of some significance because in his judgment the Authority relied on what happened as regards the option to purchase No. 2 Gilmer Terrace as supporting the inference that No. 4 had been bought for the purpose of being eventually transferred to the Parking Centre Co. He said (2 NZTC at p. 60,020) -

``I am satisfied that No. 4 was actually purchased by the objector only for the financial reason above stated and was later transferred to P Ltd. The express purpose of the purchase of No. 4 by the objector was to sell or dispose of it to P Ltd. at some time when it was convenient to do so. This finding is supported by the option later taken by the objector also in respect of No. 5 and the subsequent surrender of that option to enable P Ltd. finally to take a transfer of that land as well.''

In the judgment as reported ``P Ltd.'' refers to the Parking Centre Co. and the property referred to as ``No. 5'' is indeed a reference to No. 2 Gilmer Terrace. The evidence given by Mr. Bringans, and overlooked by the Authority in his judgment, supports the view that no definite decision to transfer No. 4 Gilmer Terrace to the Parking Centre Co. had been taken when No. 4 was acquired by the Property Developments Co., even if No. 2 were also purchased. All in all, and notwithstanding the disadvantage suffered by an appellate court, which has not seen and heard the witnesses, I am satisfied that the Authority went too far when he found that the express purpose of the acquisition of No. 4 was to sell or dispose of it to the Parking Centre Co. at some time when it was convenient to do so. By that finding I understand him to have meant that there was a definite purpose of selling or disposing of the property to the Parking Centre Co., the only uncertainty being as to the time when that purpose would be fulfilled.

In the Supreme Court Jeffries J. felt that the finding of the Authority was capable of being supported on certain additional grounds. They are set out in his judgment [77 ATC 6041]. He referred to the description, by Mr. Bringans, of the Property Developments Co. as a ``slave'' company. I agree that this is a factor supporting the inference that the ownership would not be retained by the Property Developments Co. in the event of the Group being able to purchase No. 2 Gilmer Terrace. But that would not necessarily mean that the transfer would be to the Parking Centre Co. Then the Judge referred to the fact that the ownership of the adjoining land by the Parking Centre Co. ``resulted in a kind of commercial inevitability that it would take title ultimately''. My comment is that this would only be so if the Group were able to purchase No. 2 Gilmer Terrace and even then the word ``inevitability'' seems rather strong in the light of what happened as regards the surrender of the option in relation to No. 2 Gilmer Terrace. Finally the Judge thought that the Authority must have rejected the evidence of Mr. Bringans that at the time of purchase of No. 4 Gilmer Terrace no purpose had been decided upon other than to use the

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property as a long-term investment. The Judge felt unable to differ from the Authority because of questions of credibility being involved. There is a difficulty here, but in my view the Authority attached too much weight to Mr. Little's letter and to the evidence of Mr. Williams as supportive of the inference from Mr. Little's letter urged upon him by Mr. Blank. After all, Mr. Little did not say that it was always intended to transfer No. 4 to the Parking Centre Co. The Authority also overlooked evidence relating to the surrender of the option on No. 2 Gilmer Terrace and drew a wrong inference accordingly. I have gone into these questions of fact at considerable length in deference to the careful argument submitted to us by Mr. Rabone. For the reasons which I have given I feel unable to accept in its entirety the essential finding of fact made by the Authority. However, and for the reasons which I am now about to give, I nevertheless find myself unable to hold that the assessment of additional tax by the Commissioner was incorrectly made.

In support of the appeal Mr. Rabone first set about the task of persuading us that we should differ from the Authority and from the Judge as regards the Authority's finding that the purpose of the acquisition of No. 4 Gilmer Terrace was to sell or dispose of it to the Parking Centre Co. when convenient. As I have already indicated I myself accept his submissions to that extent. He then went on to argue that the dominant purpose of the Property Developments Co. in acquiring No. 4 Gilmer Terrace was to bring its ownership and control within the Williams Group of companies. In other words, he was saying, as I understand the position, that no plans were in existence beyond acquiring the property and holding it as an investment until such time as some further plans could be decided upon. The case was therefore similar in principle to G. Williams v. F.C. of T. (supra).

Mr. Mathieson, in reply, strongly supported the finding made by the Authority. But he also submitted, in the alternative, that if the Court was not prepared to accept the finding of the Authority in its entirety nevertheless the evidence established that the dominant purpose of the Property Developments Co. in acquiring No. 4 Gilmer Terrace was to be able to dispose of it to another company within the Group in the hoped for event of the Group being able to purchase No. 2 Gilmer Terrace. He accepted that this submission involved the proposition that a conditional purpose could be a dominant purpose. It seems to me that that is clearly right. If a person buys a piece of land because he believes that it will go up in price and that he will then be able to resell it at a profit then it seems open to regard resale at a profit as his dominant purpose even though his ability to fulfil that purpose depends on the contingency of a rise in value.

In the present case it is inescapable that No. 4 Gilmer Terrace was purchased because it was adjacent to the land owned by the Parking Centre Co. and in the expectation that it could be advantageously developed along with that land in the event of the Williams Group being able to acquire No. 2 Gilmer Terrace. This was a case where from the point of view of Group management the purpose of acquisition was not just to hold as an investment. It was also to develop the property within the Group should that become possible through the purchase of No. 2 Gilmer Terrace. I am satisfied that the main or dominant purpose was to be able to develop the land rather than to hold it as an investment. Once it is appreciated that a contingent purpose can be a dominant purpose then there is no inconsistency between what I have just said and Mr. Bringans' evidence as to no definite decision having been taken as to the future ownership of the property or beyond the point of holding it as an investment.

I was at one stage inclined to the view that it would be proper to equate what I have referred to as the Group purpose of the acquisition with the purpose of the acquisition from the point of view of the Property Developments Co. However, on reflection I think the better view is to decide the purpose of the Property Developments Co. by reference only to the part which that company would play in the steps which would have to be taken within the Group in order to develop the total site. It seems to me likely that the dominant, albeit conditional, relevant purpose of the Property Developments Co. would be to sell or dispose of it to some other company within the Group, but not necessarily the Parking

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Centre Co. The fact that it was a ``shell'' company is strongly supportive of this view as also is the fact that the option in respect of No. 2 Gilmer Terrace was surrendered to the Holding Co. I would accept that a sale to another company within the Group would be ``part of a wider objective'', to adopt the phrase used by their Lordships in the Holden case (supra) . But I regard that fact as irrelevant. In short, I am persuaded that the alternative submission made to us by Mr. Mathieson should be accepted.

I should add that, in any event, I feel unable to say on the evidence that the taxpayer has discharged the onus cast upon him by sec. 36 of the Inland Revenue Department Act 1974.

For the foregoing reasons, which differ somewhat from those which found favour with the Authority and with Jeffries J., I agree with them that No. 4 Gilmer Terrace was acquired by the Property Developments Co. for the purpose of sale or disposal. The subsequent sale to the Parking Centre Co. was accordingly within the second limb of sec. 102(3).

In those circumstances it is not strictly necessary for me to express any views as to the Judge's conclusion that the sale of No. 4 Gilmer Terrace to the Parking Centre Co. was also caught by the first limb of sec. 102(3) on the grounds that the business of the Property Developments Co. ``comprised dealing in such property''. The history of properties owned and in a few cases disposed of by the Property Developments Co. up to the time of the sale of No. 4 Gilmer Terrace to the Parking Centre Co. will be found set out in the judgment of the Authority (2 NZTC at p. 60,013). Counsel agreed that the test of ``dealing'' had been fairly propounded by Henry J. in
Bates v. C. of I.R. (1955) 11 A.T.D. 96 . I am inclined to think that the evidence in the present case fell short of establishing that the business of the Property Developments Co. at the relevant time comprised dealing in land. Such properties as it had acquired appear to have been so acquired for some special purpose rather than as part of a pattern ofdealing in land. It is not however necessary to express any final conclusion on the point.

For the reasons which I have given I would dismiss the appeal.

The Court being unanimous the appeal is dismissed accordingly. The Commissioner is entitled to costs, which in all the circumstances we fix at $350.00.