Federal Commissioner of Taxation v Becker

The Federal Commissioner of Taxation appealed to the High Court of Australia against a decision concerning the assessability of certain income received by Mr. Becker. The dispute centred on whether a premium received by Mr. Becker upon the sale of shares to a company was assessable income under the provisions relating to profits arising from the sale of property acquired for profit-making by sale, or from carrying out a profit-making undertaking or scheme.

The High Court was required to determine whether the premium received by Mr. Becker constituted assessable income under section 26(a) of the *Income Tax Assessment Act 1936* (Cth) (as it then stood). Specifically, the Court had to consider whether the transaction, involving the sale of land to a company in exchange for shares issued at par, followed by the sale of those shares at a premium, fell within the scope of the profit-making provisions.

The Court, comprising Dixon C.J., Fullagar, Webb, and Kitto JJ., reasoned that the premium received by Mr. Becker was not assessable income. Their Honours held that the shares were not acquired for the purpose of profit-making by sale, nor was the transaction an undertaking or scheme entered into for profit-making. The shares were issued to Mr. Becker in consideration for the sale of his land to the company, and the subsequent sale of those shares at a premium did not alter the nature of the original transaction or the purpose for which the shares were acquired. The Court distinguished between the profit made on the sale of the land (which was not in dispute) and the premium received on the shares, finding that the latter did not represent a profit derived from a profit-making undertaking or scheme as contemplated by the Act.

The appeal was dismissed with costs.