Investment & Merchant Finance Corporation Ltd v Commissioner of Taxation (Cth) [1970] HCA 1

Investment & Merchant Finance Corporation Ltd v Commissioner of Taxation (Cth) [1970] HCA 1

The Macgrenor transaction was a single dividend-stripping scheme with two planned phases: taking the dividend and then selling the shares. Because the taxpayer acquired shares in a company full of distributable profits and then itself stripped out those profits before selling the depleted shares, the £81,900 dividend had to be brought to account in measuring the financial result of the whole undertaking. The shares were not acquired for the purpose of profit-making by sale within the first limb of s. 26(a), and under the second limb any loss under s. 52 had to be calculated by reference to the whole scheme. Section 51 did not establish that the dividend receipt should be ignored in...

Jurisdiction
Australia
Procedural Posture
Taxpayer's Appeal Against an Assessment of Income Tax for the Year of Income Ended 30th June 1965 / High Court of Australia Before Windeyer J
Outcome
Appeal dismissed with costs; assessment confirmed.
Legal Topics
['income Tax Assessment' 'dividend Stripping' 'allowable Deductions' 'share Dealing' 'assessable Income' 'dividend Rebate Under S. 46' 'profit Making Undertaking or Scheme']
['taxation Law'] ['income Tax Assessment' 'dividend Stripping' 'allowable Deductions' 'share Dealing' 'assessable Income' 'dividend Rebate Under S. 46' 'profit Making Undertaking or Scheme']

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Procedural Posture

Taxpayer's Appeal Against an Assessment of Income Tax for the Year of Income Ended 30th June 1965 / High Court of Australia Before Windeyer J

Legal Issues

  1. 1 ["Whether the taxpayer's sale of Macgrenor shares for £21 produced a deductible loss of £82,931 or whether the dividend of £81,900 received as part of the dividend-stripping operation had to be brought to account in calculating the loss." 'Whether s. 52 of the Income Tax Assessment Act 1936-1965 Cth allowed the taxpayer to deduct the claimed loss on the sale of the shares or from carrying out a profit-making undertaking or scheme.' "Whether s. 51 of the Income Tax Assessment Act 1936-1965 Cth supported the taxpayer's claimed deduction in the year of income ended 30th June 1965."]

Ratio Decidendi

The Macgrenor transaction was a single dividend-stripping scheme with two planned phases: taking the dividend and then selling the shares. Because the taxpayer acquired shares in a company full of distributable profits and then itself stripped out those profits before selling the depleted shares, the £81,900 dividend had to be brought to account in measuring the financial result of the whole undertaking. The shares were not acquired for the purpose of profit-making by sale within the first limb of s. 26(a), and under the second limb any loss under s. 52 had to be calculated by reference to the whole scheme. Section 51 did not establish that the dividend receipt should be ignored in...

Court Disposition

Appeal dismissed with costs; assessment confirmed.

Orders

  • ['Appeal dismissed with costs.' 'Assessment confirmed.' 'Usual order as to exhibits.' 'By consent this order to bear date 9th February 1970.']