Federal Commissioner of Taxation v Weatherly - [1927] HCA 14

39 CLR 190

THE FEDERAL COMMISSIONER OF

RESPONDENT, WEATHERLY

ON APPEAL FROM THE SUPREME COURT OF Income Tax-Assessment-Income-Sale of trading stock--Lixe-stock used for

breeding purposes-Income Tax Assessment Act 1922-1925 (No. 37 of 1922- No. 28 of 1925), sec. 17*. MELBOURNE,

The respondent, a pastoralist, sold about one-half of his station and that sale made it necessary for him to sell a large number of his stock. He therefore SYDNEY,

held a special sale of stock. The stock sold included sheep and cattle which April 13.

the respondent alleged would not have been sold except for the necessity of reducing the numbers brought about by the sale of land, and of these some

other manner for the purpose of dis- ment Act 1922-1925 provides that

continuing the business) shall be assess

39 CLR 191

were alleged to be ordinarily used for breeding purposes. The respondent claimed that for the purposes of his assessment for Federal income tax he was entitled to deduct from the total proceeds of the sale the proceeds of such stock as would not have been sold except for the necessity of reducing the numbers, or, alternatively, the proceeds of SO many of such stock as were ordinarily used for breeding purposes.

Held, by Knox C.J., Higgins, Rich and Starke JJ. (Isaacs J. dissenting), that the generality of sub-sec. I of sec. 17 of the Income Tax Assessment Act 1922-1925 was not limited by the parenthesis, that the sale therefore fell within the section and that the respondent was entitled to the benefit of sub-sec. 4 (a) thereof.

Decision of the Supreme Court of Victoria (McArthur J.): Weatherly V. Federal Commissioner of Taxation, (1927) V.L.R. 73; 48 A.L.T. 146, affirmed.

APPEAL from the Supreme Court of Victoria.

Lionel James Weatherly was the owner of a station property called Woolongool, in the Western District of Victoria, on which for a number of years he had carried on the business of a pastoralist. On 1st July 1923 the area of the property was 27,142 acres and the approximate number of stock carried was 20,000 sheep and 700 cattle. In March 1923 Weatherly sold to the Closer Settlement Board 14,344 acres of the property, possession of which was to be given on 31st January 1924. This made it necessary for Weatherly to get rid of a large number of his stock SO that the remainder might be carried on SO much of the property as he retained. He accordingly held a special sale of sheep and cattle, at which he sold 14,446 sheep and 700 cattle. Of this stock 9,633 sheep and 364 cattle were sold solely on account of the necessity for reducing numbers consequent upon the sale of the land to the Closer Settle- ment Board. Of the 9,633 sheep and 364 cattle sold by Weatherly some were used by Weatherly for breeding purposes. In his return for the purpose of Federal income tax for the year 1924-1925 Weatherly deducted from the total proceeds of the special sale the…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Federal Commissioner of Taxation v Weatherly

Details

AGLC: Federal Commissioner of Taxation v Weatherly [1927] HCA 14
Case: [1927] HCA 14
Decision Date: 13 April 1927

CaseChat Overview and Summary

The Federal Commissioner of Taxation appealed to the High Court of Australia from a decision of the Supreme Court of Victoria concerning the assessability of income derived from the sale of livestock. The taxpayer, Lionel James Weatherly, a pastoralist, was compelled to sell a significant portion of his sheep and cattle due to the sale of a large part of his station property. He sought to deduct the proceeds from the sale of livestock that would not have been sold but for this necessity, or alternatively, the proceeds from livestock ordinarily used for breeding purposes.

The central legal issue before the High Court was the interpretation of section 17 of the *Income Tax Assessment Act 1922-1925*. Specifically, the court had to determine whether the introductory words of subsection 1, which referred to sales "whether on the sale of a business as a going concern or in any other manner for the purpose of discontinuing the business," limited the scope of the section to only those specific circumstances, or if they were merely illustrative. The court also considered the application of subsection 4(a) of section 17, which excluded livestock ordinarily used for breeding purposes from the definition of "trading stock" for the purposes of the section.

A majority of the High Court, comprising Knox C.J., Higgins, Rich, and Starke JJ., held that the generality of section 17(1) was not limited by the parenthetical words. They reasoned that these words were intended to be illustrative rather than restrictive, and that the sale of livestock in this instance fell within the scope of section 17. Consequently, the taxpayer was entitled to the benefit of section 17(4)(a), meaning the proceeds from the sale of breeding stock were not to be treated as assessable income. Isaacs J., dissenting, argued that the parenthetical words were restrictive and that the sale, not being of the entire business or for the purpose of discontinuing it, did not fall within section 17, thus making the proceeds assessable income under other provisions of the Act.

The High Court, by majority, dismissed the Commissioner's appeal, affirming the decision of the Supreme Court of Victoria. The appeal was dismissed with costs.

Orders