Bradfield v Federal Commissioner of Taxation

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ALR 615

REPORTS OF CASES

D E T E R M IN E D IN

T H E

HIGH COURT OF AUSTRALIA

1923-1924.

[HIGH COURT OF AUSTRALIA.]

BRADFIELD

A p p e l l a n t :

THE FEDERAL COMMISSIONER OF ]

T A X A T IO N ............................................ f

R e s p o n d e n t .

War-time Profits

Tax — Assessment — Business — Exception — "Profession” — H. C. o f A.

“ Employment ”—“ Qratuity ”— “ Bonus ”—Racehorse trainer—Additional tax

1923-1924.

—Power to remit— War-time Profits Tax Assessment Act WHI-191% (No. 33 of

'—^

1917—No. 40 of 1918), secs. 4, 7 (1), 8 (1), 55—Income Tax Assessment Act Me l b o u r n e ,

1915-1918 (No. 34 o/1915—iFo. 18 o/1918), see. 14 (/), (g).

Oct. 22, 23, 25, 1923.

Sec. 7 (1) of the War-time Profits Tax Assessment Act 1917-1918 levies a tax

Higgins J.

upon all war-time profits from any “ business ” to which the Act applies.

By

sec. 4 “ business” includes any “ profession.”

Sec. 8 (1) provides that “ the Mar. 5, 1924,

businesses to which this Act applies are all businesses (whether continuously

Knox C.J.,

carried on or not) of any description deriving profits from sources within

Isaacs,

Gavan Duffy,

Australia, excepting . . . ( c ) offices or employments; and (d) any

Rich and

j)rofession the profits of which depend mainly on the personal qualifications

Starke JJ .

of the person by whom it is carried on, and in which comparatively little or no

capital expenditure is required ; ” &c.

Held, that, in order to bring his business within the exception of sec. 8 (1) (d) of the War-time Profits Tax Assessment Act 1917-1918, it is not sufficient for

HIGH COrRT

[1923-1924.

H. C. OF A. the taxpayer to show that his profits depend mainly on his personal qualifi­

cations and that comparatively little or no capital is required, but he must

1923-1924.

also show that his occupation can properly be called a “ profession.”

B r a d f ie l d

V.  Held, also, that the business of training racehorses for their various owners,

FEDBEAi

Com m is­

separately and individually, is not a “ profession ” ; nor is it an “ employ­

s io n e r OF

ment ” within the meaning of sec. 8 (1) (c).

T a x a t io n .

Held, further, that a payment of a sum of money to a trainer of racehorses by an owner of one of the horses in addition to the stipulated payment is not a “ gratuity” within the meaning of sec. 14 {/) of the Income Tax Assessment Act 1915-1918, but is a “ gratuity ” or a “ bonus ” within the meaning of sec. 14 (g) of that Act.

Decision of Higgins J. affirmed.

Held, by Higgins J., that no officer other than the Commissioner of Taxation has power to relieve a taxpayer from the liabihty to payment of the additional tax prescribed by sec. 55 of the War-time Profits Tax Assessment Act for omission to pay war-time profits tax within the specified time.

A pp e a l from Higgins J.

On an assessment of Richard Bradfield for war-time profits tax, he objected to the assessment on the grounds (1) that he was not liable to pay any tax under the War-time Profits Tax Assess­ ment Act 1917-1918 ; (2) that the business of a professional trainer of racehorses, wliich lie carried on, was exempt from the pro­ visions of that Act by reason of sec. 8 thereof, as the profits of such business depended mainly on his personal quahfications and in such business comparatively little or no capital expenditure was required; (3) that the profits derived by him from his business arose from his employment as such professional trainer of racehorses by the respective owners thereof and that his business was therefore exempt under sec. 8 ; (4) that the assessment was excessive; (5) that the assessment wrongly included the capital value of freehold premises upon part of which he resided with his wife and family and part of which he used for the purposes of his business, and if such value were excluded he would not be taxable under the Act. The Commissioner having disallowed the objections, they were transmitted as an appeal to the High Court, and the appeal came on for hearing before Higgins J.

The other material facts are stated in the judgment of Higgins

M C.L.R.I

OF AUSTRALIA.

H . C. OF A. 1923-1924.

Hayes K.C. and Reginald Hayes, for the appellant.

Ham, for the respondent.

B r a d f ie l d

V.

Fe d e r a l Com m is­

(Jar. adv. vuU.

sio n e r OF

T a x a t io n .

Oct. 25, 1923.

HiGGiiNS J. delivered the following written judgnient:—The appel­ lant here, a racehorse trainer, objects to being taxed under the War­ time Profits Tax Assessmeirt Act 1917-1918 for the year ending 30tli June 1919. The first three grounds of objection raise the point that under sec. 8 (1) (c) and (d) he is not taxable at all, whatever the profits of his business ; the fourth ground is that the assessment is excessive ; the fifth ground, relating to the inclusion of his freehold premises, has been abandoned.

By sec. 7 (1) the tax is levied on aU war-time profits from any business to which the Act applies. Under sec. 4 “ business ” in­ cludes any “ profession ” or trade. Under sec. 8 (1) the businesses to which the Act applies are all businesses of any description deriving profits from sources within Australia, excepting {inter alia) (c) offices or employments,” and (d) “ any profession the profits of which depend mainly on the personal qualifications of the person by whom it is carried on, and in which comparatively little or no capital expenditure is required.”

What the appellant does to earn his profits is set out in par. 2 of the admissions ;—“ The appellant has acquired considerable knowledge, skill and experience extending over many years in con­ nection with the training, handling and treatment of racehorses for the purpose of competing for prizes and money, and by reason thereof he is engaged by various owners of racehorses separately and individually to train their horses for the purpose of racing. He accordingly receives the custody of the horses, provides them with the requisite stabling and feed and the necessary attendance by apprentices, grooms and stable boys, and formulates a plan for training each horse in accordance with the views, directions and requirements of the owmer—which views, directions and require­ ments he is bound to obey and carry o u t; and by the terms of his engagement in each case he is paid for his services by a remuneration

HIGH COURT

[1923-1924.

H. C. OF A. of a fixed sum per week for each horse together with a commission 1923-1924. upon the amount of stakes won by each

B r a d f ie l d successful horse, and each owner has to bear and pay all other

V.

F e d e k a l

expenses in connection with his horse, such as entrance and accept­

Coarmis-

SIONER OF

ance fees for races, riding fees for jockeys, shoeing charges and

T a x a t io n . travelling expenses. During the year of assessment, the appellant on

behalf of the owners paid £2,592 under the latter mentioned headings

Higgins J.

and was reimbursed by the owners for such payments.”

I treat the appellant, therefore, as “ employed ” by various owners, separately and individually, to train their horses ; but it does not follow that he is in the employment of any one owner. He is not the whole-time employee or servant of any owmer. What is the meaning of exempting from the businesses to which the Act applies “ offices or employments ” ? In my opinion, the meaning is that although the owner of a business is taxed (cf. sec. 7 (5); sec. 8 (3) (a); sec. 10 (1), proviso, (3); sec. 11 (1a); sec. 14 (2); sec. 15 (9); sec. 17 (1), &c., &c.), his employee is not taxed in respect of his remuneration. The employee does not carry on the business for himself. If the word “ offices ” were used alone, in the exemption (c), the exenn:)tion might be treated as restricted to what are tech­ nically “ offices ” ; so the words “ or employments ” are added. The employer is taxed—not any employee as such. Tins view is in accordance with the reasoning of the Court of Appeal in Robbins V . Commissioners of Inland Revenue (1). Therefore, the appellant,

by keeping stables and staff for the owmers who employ him separately, is not in the employment of any one owmer or body of owners, and cannot claim exemption under sec. 8 (l)(c). He carries on the business of trainer; he gets the profits of that business.

As for the exemption claimed under sec. 8 (1) (d), I quite concur with the view taken by my brother Starke, in the recent Queensland case of Robbins Herbal Institute v. Federal Commissioner of Taxation (2), that it is not sufficient for the appellant to show that his profits depend mainly on his personal qualifications, and that comparatively little or no capital is required ; he must also show that his occupa­ tion can properly be called a “ profession.” What is a “ profes- Sion’ 1 I ta m to the.Standard Dictionary, an American dictionary,

(1) (1920) 2 K.B. 677.

(2) (1923) 32 C.L.R 4.57.

34 C. L.n. I

OF AUSTRALIA.

H. C. OF A. 1923-1924.

for in America the denotation of the word seems to be even more

liberal in practice than amongst ourselves ; and I find “ profession ”

is said to mean :—“ 1. An occupation that properly involves a

B r a d fieu d

r.

liberal education or its equivalent, and mental rather than manual

F e d e r a l Com m is­

labour; especially, one of the three so-called learned j>rofessions.

s io n e r OP

2. Hence, any calling or occupation involving special mental and other

'r.AXATION.

attainments or special discipline, as editing, acting, engineering,

Higgins .J.

authorship, &c.” As Scrutton L.J. said in Currie v. Commissioners of Inland Revenue (1), a question of degree is involved in nearly every case in applying the word “ profession ” ; and I have no hesitation in saying, having seen and heard the witnesses, that the occupation of this racehorse trainer is not a “ ])rofession.” I see no reason for differing from the view taken by the Commissioner on this subject. The assessment itself is, on this appeal, prima facie evidence that the amount and all the particulars of the assessment are correct {sec. 25) ; and that ])rima facie evidence has not been shaken by anything that 1 have heard. Nor am I satisfied that the other con­ ditions for the exemption have been satisfied.

As for the £250 gratuity (or “ bonus,” as the appellant calls it) paid by a certain firm of owners to the appellant, in addition to the .stipulated weekly payment and the commission on first winnings, this sum was, in my opinion, rightly included in the assessment. Assuming, as the appellant contends, that by virtue of sec. 10 the provisions of the Income Tax Assessment Act 1915-1918 (sec. 14 (/) and (g)) are applicable to this sum, 1 am of opinion that, on the true construction of sec. 14, this sum is a “ gratuity ” or “ bonus ”—in the nature of a “ ti]) ”—within (g), and not “ a retiring allowance or gratuity ” within (/).

A small matter—as to £10 “ additional ta x ” claimed by the Commissioner because of the failure of the appellant to comply with the regulations in time— gave me some trouble. I assume, in favour of the appellant, that the matter is one of excessive assessment within objection 4. The appellant’s agent alleges that after the due time he asked one McGrath, acting chief assessor, to extend the time, and that the extension was granted. McGrath is in Sydney,

and could not be called.

But 1 am not satisfied that there was any

(1)

(i92 ])2K .B . 332, at pp. 340-341.

HIGH COUHT

[1923-1924.

H. C. OF A. promise to remit the additional tax already incurred ; and, on the

1923-1924

construction of sec. 55, I am of opinion that no officer other than the

B r a d f ie l dCommissioner could relieve the taxpayer of this liability. So

V.

F e d e r a i . strictly are such remissions regarded by Parliament that the Com­

Com m is­

missioner, under sec. 55, has to furnish to the Treasurer, for presenta­

s io n e r

OF

T a x a t io n .tion to Parliament, a report of all such remissions, with his reasons.

Higgins J.It may ivell be that the officer merely meant that the office would

not prosecute if the taxpayer performed his duty before 24th February. Giving the full benefit, however, of the defective evi­ dence as it stands to the appellant, I am not satisfied that the inclusion of the £10 in the assessment was not right.

The appeal is dismissed with costs.

Mar. 5, 1924.

From that decision the appellant now appealed to the Full Court.

Hayes K.C. (with him Hennessy), for the appellant. The appel­ lant is within the exemption either of par. (c) or of par. (d) of sec. 8 (1) of the War-time Profits Tax Assessment Act 1917-1918. He does not carry on a separate buvsiness of his own but is in the " employ­ ment,” within tlie meaning of par. (c), of the persons whose horses he trains. [Counsel referred to Robbins v. Commissioners of Inland Revenue (1) ; R. v. T>te (2) ; Burt A Co. v. Commissioners of Inland Revenue (3).] The word “ profession ” has now a meaning wide enough to include the apjiellant’s business. [Counsel referred to Currie v. Commissioners of Inland Revenue (4).] The £250 was a “ gratuity” wathin sec. 14 (f) of the Income Tax Assessment Act 1915-1918. That word is not qualified by the word “ retiring.” That sum is not a “ gratuity ” within the meaning of sec. 14 (g) liecause that word is there qualified by the words “ in respect of or for or in relation to any employment or service ” of the taxpayer.

Ham. for the respondent, was not called upon.

K n o x C.J. In this case I think it is quite clear tliat the decision of the learned Judge was right and that the appeal should be dismissed.

(1) (1920) 2 K.B. 677.(3) (1919) 2 K.B. 650, at p. 666.

(2) (1861) 30 L.J. M.O. 142.

(4) (1921)2K .B., at pp. 340-.341.

34 C.L.R.I

OF AUSTRALIA.

H. C. OF .A. 1923-1924.

I saacs J. J agree that the appeal should be dismissed. 1 wish to say a few words as to the meaning of the words under considera­

tion.

B r .\.I)F IK L I)

V.

Two words are relied on by Mr. Hayes with regard to liability at all. One is the word “ employments.” I think that word is

F e DKK.'VL

CojIMIS-

SIONEK OF

used in contradistinction to principal in relation to a business.

T.^XATIOV.

The other word is “ profession.” That is an expression which 1

Isaacs .T.

agree is not capable of exact definition. The Act is one addressed to the general understanding of the community, and the meaning of the word as there found depends entirely on that understanding. The word “ profes.sion ” is not one which is rigid or static in its signification ; it is undoubtedly progressive with the general pro­ gress of the community, but at the present time and according to the present understanding of people the business of a horse-trainer is not included in the word “ profession.”

With regard to the £250, Mr. Hayes admits that if the word “ retiring ” is to be applied to the word “ gratuity ” in sub-sec. (/) of sec. 14 of the Income Tax Assessment Act, he has no case on the

subordinate point.

I think it clearly is to be so applied.

Ga v a n D u f f y J.

I agree that the judgment appealed from is

right and that the appeal should be dismissed.

R ich J. I agree with the conclusion arrived at by my brother Higgins. The facts show that the appellant was a principal. The word “ employments” in clause (c) of sec. 8 (1) was not intended to and does not include the case of a principal in a business. The word “ profession ” is a vague and now-a-days a somewhat elastic term. There is no need to go afield, whether to dictionaries or to other countries, to ascertain its meaning. In Australia, a t any rate, although we have travelled beyond the well-known three learned professions, a horse-trainer does not carry on a “ profession.” On the minor point I think that the word “ retiring ” qualifies the word “ gratuity.”

St a r k e J.

I agree that the appeal should be dismissed.

Appeal dismissed ^vith costs.

HIGH COURT

[1923-1924.

H. C. or A.

Solicitor for the appellant, W. H. Peers.

192.3-1924.

Solicitor for the respondent, Gordon H. Castle, Crown Solicitor for

B b a d f ib l d

the

Commonwealth.

r.

F e d e r a l Com m is­

s io n e r OF

B.L.

T.a x a x io n .

[HIGH COURT OF AUSTRALIA.)

CAMERON

. A p p e l l a n t ;

THE Dl^PUTY FEDERAL COMMISSIONER

R e s p o n d e n t .

OF TAXATION FOR TASMANIA .

n

H. C. OF A. Income Tax—Assessment— Valuation of live-stock— “ Value as prescribed”—

Regulations— Validity—Income Tax Assessment Act 1915-1918 {No. 34 of 1915—No. 18 of 1918), secs. 3, 14 (a), 65—Income Tax Assessment Act Me l b o u r n e1918 (No. 18 of 1918), secs. 2, 48—Acts Interpretation Act 1904 (No. 1 of 1904),

1924.

Feb. 18, 19

sec. 9—Income Tax Regulations 1917 (Statutory Rules 1917, No. 280—Statutory

^fay 22.

Rules 1918, No. 315), reg. 46.

Knox C.J..

Held, by Knox C.J., Isaacs, Gavan Duffy and Rich JJ., (1) that the words

lenaca.

Cavan Dully,

“ value as prescribed ” in the definition of “ value ” in sec. 3 of the Income

Rich and

Starke JJ.Tax .Assessment Act 1915-1918 meant, not the true value ascertained in a

prescribed manner, but an artificial or arbitrary sum which was to be deemed to be the value ; (2) (Starke J. dissenting) that for the purpose of ascertaining the value of live-stock pursuant to sec. 14 (a) of the Income Tax Assessment .Act 1915-1918, Statutory Rule 1918, No. 315, being invalid, the Commis­ sioner was not entitled to rely on reg. 46 of Statutory Rule 1917, No. 280, as a prescription of value, for that regulation was itself inconsistent with the provisions of the Income Tax Assessment Act 1915-1916, under wliich it was made, and was not validated or adopted by the Income. Tax Assessment -4c< 1918 ; and (3) that there was nothing in the Income Tax Assessment Act 1915-1918 which could be regarded as a prescription of value.

Held, therefore, by Knox C.J., Isaacs, Gavan Duffy and Rich JJ. (Starke J. dissenting), that in ascertaining the income of a grazier under sec. 14 (a) of the Income Tax Assessment Act 1915-1918 no sum could be taken into account in respect of the excess in value of live-stock owned at the end of the year of assessment over its value at the beginning of such year.