Case S74

Judges:
MB Hogan Ch
P Gerber M
GW Beck M

Court:
No. 3 Board of Review

Judgment date: 30 August 1985.

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M.B. Hogan (Chairman)

I agree with my colleague, Dr Gerber, for the reasons given by him that this taxpayer must succeed on the issue of interest.

2. I agree with both my colleagues that the amount of $600 in respect of which the Commissioner has allowed a deduction as expenditure on repairs, should not be allowed as a deduction. I believe this is one of those relatively rare instances in respect of which a Board may exercise its power to increase the assessment before it.

3. In support of this view, I take as my starting point the observation by Kitto J. in
Mobil Oil Australia Pty. Ltd. v. F.C. of T. (1962-1963) 113 C.L.R. 475 at p. 502 which succinctly summarises the function of a Board of Review; his Honour there noted that a Board's ``... function is merely to do over again (within the limits of the taxpayer's objection) what the Commissioner did in making the assessment''. What occurred in this reference is that initially, the Commissioner issued an assessment accompanied by an alteration sheet which simply stated:

``Loss on rented property not allowed 12167.''

There was no specification of the items in respect of which the Commissioner had refused to allow a deduction. What in fact occurred was that the deductions claimed, which are set out in para. 2 of Dr Beck's decision, were limited to the amount of income received by way of rent from Dr M. This forced the taxpayer's accountants to object in very general terms claiming that ``the expenses claimed are fully deductible pursuant to Section (sic) 51, 53 and 54 of the Income Tax Assessment Act ''. This has to be read, and no doubt was intended by the drafter of the letter to be read, as a claim for the allowance of the full amount of each individual item listed under the heading of ``Expenses'' as set out in Dr Beck's para. 2. Thus the full amount of each individual item is brought into question by the form of the taxpayer's objection. In the words of Kitto J. quoted above, those are ``the limits of the taxpayer's objection'' within which the Board is empowered to act in exercising its function of doing over again the work of the Commissioner in making the assessment.

4. The Commissioner issued a decision on this objection, partially allowing the objection, which decision was accompanied by an adjustment sheet containing the following notations:

``Interest expense was previously allowed to the extent of income received - $6,915

Additional expenses allowed on amendment are detailed below:

                                               $

      Borrowing

        Expenses                     Deduct   513

      Depreciation                          2,054

      Insurance                               255

      Rates                                   873

      Repairs                                 600       4,293''
          

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ATC 536

The taxpayer's response to this assessment which is the assessment under reference before the Board, was to indicate in the terms quoted in Dr Beck's para. 9 his dissatisfaction with the Commissioner's decision in relation to the items:

• Interest on loans
• Repairs and maintenance.

These are the only items in respect of which the Commissioner has limited the deduction for the total expenditure claimed. Despite the fact that the Commissioner has allowed a deduction of $600 for repairs, the words of the taxpayer's objection against his original assessment, which words set the limits within which the Board is empowered to act, have opened the question of the whole of the expenditure on repairs; accordingly, in my view, the Board, acting on the evidence before it, may vary the assessment in this particular, to increase it by refusing the taxpayer's claim for a deduction in respect of expenditures on repairs in the year under review.

5. I agree the assessment should be adjusted in the manner outlined in para. 8 of the decision of my colleague Dr Gerber.