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J^iSTXlR^PkOPITS.
- Taxation Appeal. ^
De Grey Company's Case.
Mr. Justice Starke delivered judgment
in the High Court yesterday in the case
in which the De Grey River Pastoral
Co.. Ltd.. nnnenlfxl Atm'irivi- iIia. infwmr
ax assessment of the 'Federal Commis
lioner of Taxation. Hie point involved
ras whether a sum of £9,3:!7 in the
looks of the company was a realisation
-f capital or a 'business transaction,' the
irbfits from which would ibe taxable in
:ome. .? ? . ; ' ' ????.'.??.' '???'?
Hi« Honour, in his. judgment; 'said: —
'The appellant, the De Grey River Pas
oral Co.. Ltd., was estaWiBhcd' to ac
tuire pastoral- properties' and to carry
m the 'business of giaziersr, farmers and
sellers of -and dealers in real and per
ibnal property, live and dead stock., and
lie produce of the soil of any kind. It
wasessed -several pastoral' properties of
arge area in Western Australia, known
is De Grey, Mnlyie.: Warrawagine, and
Salfour Downs Stations. - The former
wo adjoined one another, and comprised
lomc 791,000 acres. . . . In 1917 the com.
?any sold Warrawagine and Balfour
3owns, and the stock thereon, and re
wived by December 31 1920, a large
mm of money. The appellant company
?cturrted its gross income for its bal
'22?5 P*rJod» January to December,
1920, but claimed in Bubstance a reduc
ion of all profit arising from the sale
-f the cattle on Warrawagine and Bal
;our Downs Stations. The Commis
lioner disallowed this deduction. Allow
ng for sonie adjustments the net amount
or taxation purposes involved in the
[eduction claimed is £8,144. The appel
ant company claims that this sum repre
lents a realisation of its assets, and not
he proceeds of any business aimed on
-y it, and that the sum is not otherwise
axable. ? It relies, in support of. this
mhtenrion, upon Newman's case and
aickman's case, decided in this Court.
In my opinion, the contention is un
:enablc, iboth in fact and in law. These
nonc.va are, in point of fact,, proceeds ot
he business carried on iby the appel
ants. The question.' as liord Buckmas
:er says in O'Kane's case, is whether
rach proceeds arose from a method of
realisation inconsistent with a contisu
ng concern.
'Now, in my, opinion, the acts of the
-ompany itself afford the Court knport
mt evidence for the determination of this
]uestion of fact. The appellant company
nay well be bound by its own actions,
[n its books it carried the proceeds of
the sale of (be cattle to Copley and
-ther« to 'cattle trading account, Bal
four Downs, cattle depasturing on War-'
-awagine pending realisation.- It showed
i net profit on . this account of £9^27.
ind that profit was- carried into its gene
ral profit and Ion account for its trad
ing year ended December 31. 1020. From
the profit and low account this sum was
tamed to the liability side of the balance
sheet of the company. Similar entries
ire found in the accounts of the eom
liany for the balancing period ended De
cember 31, 1921. - r .---.?
'The total trading profits for the trad
ing year 1921 are stated at £18^84. of
which, however. =£7.834 represents prd
fits in respect of the cattle from Warra
ragine and Balfour Downs. The accu
mnlated profits of the company at the
end of 1921 amounted, according to it*
accounts, to £60^77. . and between Oc
tober 5. 1921, and April 8, 1922. it de
riared dividends to the extent of £45,078.
But- in April, 1932, the company pur
[H-rted to apportion these dividends. It
iras resolved to treat the first dividend
is paid out of the profits of the year
ended December 31. 1918. and the re
maining dividend as coming from taxable
profits in the hands of the company, de
rived in the year ended December.- 31,
1921, and preceding years in the ordinary
sequence.. Assuming tfcat the -company
eould properly snake this appropriation,
still it treated the accumulated fund of
E66.677 in its hands as ordinary trading
profits dhrfcrikle, if it ebouM so resolve,
mongst its shareholders. - The «ale to
Copley and others was not, it may be
admitted, an example of ordinary me
thods of trading on the part of the com
pany, bot it was not for the purpose of
Hiding the companyV trade. The com
9any still carried on its business on the
De Grey and Mnlyie Stations, and all
that can be said, in my opinion, is that
it realised some, of its stock in an un
asual manner as a result of. an Act
passed by thev Parliament of Western
Australia. So far as the external work!
was concerned, the company was en-'
raged in trading, and its sale of cattle
was merely a modification of its usual
method, broofhtabout by. the passing of
the .Act. % ?;? . The proceeds of the sale
to Oopley and others are in ? point of law,
ureur opinion, assessable to income tax
whether they are or are not the pro
ceeds of the business carried on by the
appellant. .
'There are other saam assessable to
income tax as well as the. proceAs of
the business carried on by tbe taxpayer!
for. example, earnings and income from
property. -The moneys accruing from
this, sale were, in my opinion, earnings
even if they were not the. proceeds of
any business carried oh by the taxpayer.
These gains and profits were not- due to
a mere realisation of an asset ? or the
change of an investment, or to the en
hancement of capital. They, were the
result of a business operation, forced
upon the company by an Act of Parlia
ment, no doubt, but they nevertheless
arose from the sale of stock whuaV it
had aeqaired or bred for the purposes
of profit-making by sale. The company,
then, made a profit in accordance with
its scheme of 'business, although - the
method of realising that profit wsb to
some extent forced upon it by the 'Act
Profits so made are, in my opinion, in
come and assessable to tax; -The appeal
is dismissed with costs.' .
$