Thomson v Federal Commissioner of Taxation

The appellant, John Thomson, appealed to the High Court of Australia against an income tax assessment made by the Federal Commissioner of Taxation. The assessment included a sum received by Thomson upon the assignment of certain mining leases to the Government of Queensland. Thomson contended that this payment was exempt from income tax under a proviso to section 14(d) of the *Income Tax Assessment Act 1915-1921*.

The central legal issue before the Court was whether Thomson qualified as a "bona fide prospector" for the purposes of the proviso, which exempted proceeds from the sale, transfer, or assignment of mining property leases from income tax if the Commissioner was satisfied that the transferor was a bona fide prospector. A secondary issue arose regarding the Court's power to review the Commissioner's satisfaction.

The Court held that the proviso to section 14(d) stipulated that the Commissioner must be satisfied that the transferor was a bona fide prospector. The Court determined that it was not authorised to substitute its own opinion or satisfaction for that of the Commissioner, citing *Cornell v. Deputy Federal Commissioner of Taxation*. On this ground alone, the appeal was dismissed. However, the Court also considered the merits, finding that Thomson was not a prospector within the meaning of the Act. The Court reasoned that a prospector typically explores for minerals and establishes their existence, whereas Thomson had acquired leases in an area already known to contain significant iron ore deposits, some of which had been previously leased. His actions were characterised as those of a mining speculator rather than a prospector.

The appeal was dismissed with costs.