Commissioner of Taxation v Westfield Limited

The Commissioner of Taxation applied for special leave to appeal to the High Court of Australia against a decision of the Full Federal Court. The dispute concerned whether a profit made by the respondent, Westfield Limited, from the sale of a parcel of land was assessable income. The Full Federal Court had overturned a decision of Mr Justice Sheppard, who had found the profit to be assessable.

The primary legal issue before the High Court was the proper interpretation and application of the principles established in *Myer Emporium Ltd v Commissioner of Taxation* regarding the distinction between capital and revenue profits, particularly in the context of land sales. Specifically, the Court was asked to consider whether the Full Federal Court had interpreted *Myer Emporium* too narrowly, potentially eliminating the capital-revenue distinction, or conversely, too broadly by imposing limitations not intended by the High Court. The Commissioner argued that the Full Federal Court's interpretation of *Myer Emporium* was too restrictive, leading to the exclusion of the profit from assessable income.

The Commissioner contended that the Full Federal Court erred by holding that profit from land sales is assessable only if the taxpayer's business ordinarily involves buying and selling land, or if the land was purchased with the specific purpose of profit-making by sale, with the sale being the "very means" of profit. The Commissioner argued that this interpretation was narrower than that intended by *Myer Emporium*. The respondent's business primarily involved the design, construction, letting, and management of shopping centres, often on land not owned by the respondent. While shopping centres were usually held for long-term investment, the respondent had, prior to the transaction in question, ceased directly owning land after a 1978 reconstruction. The subject land was described as a strategic parcel essential for the development of a shopping centre. The Commissioner submitted that, on a proper application of *Myer Emporium*, the profit from the sale of this land should have been included in assessable income, as it was not a mere realisation of an ordinary investment.