Henty House Pty Ltd (in voluntary liquidation) v Federal Commissioner of Taxation

Henty House Pty Ltd (in voluntary liquidation) appealed to the High Court of Australia against a decision of the Federal Commissioner of Taxation concerning the assessment of income tax. The dispute centred on the tax treatment of the disposal of assets by Henty House, which had previously received deductions for depreciation on those assets.

The primary legal issue before the High Court was whether, upon the disposal of assets for a consideration exceeding their depreciated value, the excess amount constituted assessable income under the relevant provisions of the *Income Tax Assessment Act 1936* (Cth). This involved determining the characterisation of the profit arising from the sale of depreciated assets.

The High Court held that where an asset has been the subject of depreciation deductions, and it is subsequently sold for a price greater than its depreciated value, the profit realised to the extent of the depreciation previously allowed is assessable income. The Court reasoned that the depreciation deductions effectively reduced the cost base of the asset, and the recoupment of this previously allowed deduction upon sale represents a realisation of that tax benefit, thus falling within the definition of assessable income. The Court affirmed the principle that the taxing statute should be construed to give effect to its plain meaning, and that the recoupment of depreciation is a form of income.