Meares v Acting Federal Commissioner of Taxation

The High Court of Australia considered an appeal by Meares against a decision of the Acting Federal Commissioner of Taxation concerning the assessment of income tax. The dispute centred on whether a sum of money, carried forward to the credit of the profit and loss account, constituted assessable income under the *Income Tax Assessment Act 1915-1916*.

The primary legal issue before the Court was the interpretation of section 14(b) of the *Income Tax Assessment Act 1915-1916*. Specifically, the Court had to determine whether an amount that had been previously assessed for income tax in an earlier financial year, and subsequently carried forward to the profit and loss account of a subsequent year, was to be treated as income of that subsequent year for the purposes of a further assessment.

The Court reasoned that the Act intended to tax profits derived from the business in the relevant year of income. An amount that had already been subject to tax in a prior year, and was merely carried forward as a credit in the profit and loss account, did not represent a new profit or gain derived in the subsequent year. Therefore, it was not assessable income for that later period. The Court applied the principle that income is to be taxed in the year it is derived, and amounts previously taxed should not be taxed again.

The appeal was allowed, and the assessment made by the Commissioner was set aside.