Federal Commissioner of Taxation v. Whitfords Beach Pty. Ltd.

Judges: Gibbs CJ
Mason J

Murphy J
Wilson J

Court:
Full High Court

Judgment date: Judgment handed down 17 March 1982.

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Murphy J.

The question is whether the taxpayer's assessment is excessive. The burden is upon the taxpayer to prove that it is excessive (see Income Tax Assessment Act 1936, as amended, (``the Act'') sec. 190(b);
McCormack v. F.C. of T. 77 ATC 4141 ; (1979) 53 A.L.J.R. 436 ;
Macmine Pty. Ltd. v. F.C. of T. 79 ATC 4133 ; (1979) 53 A.L.J.R. 362 ).

The Commissioner included in the assessment profit from the taxpayer's development and sale of certain land on the basis that it came within the second limb of sec. 26(a) of the Act as ``profit arising... from the... carrying out of any profit-making undertaking or scheme''.

The land development scheme falls easily within the conception of a profit-making undertaking or scheme. The development involved not only subdivision, but planning and building of roads and other services, as well as other activities involved in modern land development schemes, and it was undertaken for profit-making. This is not a borderline case. It is altogether different from, for example, simple realisation of a large allotment by subdivision into several smaller blocks. The profit therefore comes within sec. 26(a) as profit from a profit-making undertaking or scheme. The taxpayer relied upon the judgment of the Privy Council in
McClelland v. F.C. of T. 70 ATC 4115 ; (1970) 120 C.L.R. 487 to support the contention that the taxpayer's land development scheme did not fall within sec. 26(a). In McClelland's case the majority of the Privy Council misunderstood sec. 26(a) and largely nullified it. Contrary to their holding and consistently with the minority in the Privy Council and the majority view of the High Court in that case, sec. 26(a) has a wide application to capital gains.

The taxpayer founded a further argument upon Chief Justice Barwick's statement in
Steinberg v. F.C. of T. 75 ATC 4221 ; (1975) 134 C.L.R. 640 that to bring the second limb of sec. 26(a) into operation the scheme of realisation must have been contemplated at the time of acquisition. Ultimately the taxpayer conceded that the submission amounted to reading at the end of sec. 26(a) an exception to the effect ``except an undertaking or scheme which relates to any property previously owned by the taxpayer''. No such exception is warranted.

The assessment has not been shown to be excessive. The appeal should be allowed. I agree with the order proposed.