Dickson v Federal Commissioner of Taxation

In *Dickson v Federal Commissioner of Taxation*, the appellant, Raynes Waite Stanley Dickson, appealed to the High Court against an income tax assessment that included 801 bonus shares he received from the Castlemaine Brewery Company Melbourne Ltd. The dispute centred on whether these bonus shares constituted assessable income under the *Income Tax Assessment Acts 1936*.

The court was required to determine whether the bonus shares, which were a capitalization of profits, were assessable income under section 44(1)(a) of the Act, or if they were excluded by section 44(2)(b)(iii). This exclusion applied if the dividends paid from profits arose wholly and exclusively from the revaluation of assets not acquired for resale at a profit, and if such dividends were satisfied by the issue of shares. The core legal issue was whether the profits used to issue the bonus shares were derived from a genuine revaluation of the Castlemaine company's shares in Carlton and United Breweries Ltd.

Latham C.J. and Evatt J. held that while the bonus shares were prima facie dividends under section 6 of the Act, they were excluded from assessable income by section 44(2)(b)(iii). Their reasoning was that the profits from which the dividends were paid arose from the revaluation of the Carlton and United Breweries shares, which were assets not acquired for resale at a profit. The majority found that the revaluation, despite the lower figure initially recorded in the balance sheet and the subsequent upward adjustment to 24s. per share, was a valid revaluation for the purposes of the Act. Dixon J. dissented, finding that the revaluation was not genuine and was part of a scheme to avoid tax.

The appeal was allowed, and the bonus shares were not included in the appellant's assessable income.