Investment & Merchant Finance Corporation Ltd v Commissioner of Taxation (Cth) [1971] HCA 35

Investment & Merchant Finance Corporation Ltd v Commissioner of Taxation (Cth) [1971] HCA 35

By majority, the appeal was allowed because the Macgrenor share transaction was part of the taxpayer's business as a dealer in shares and was of a trading, not capital, character. The shares were treated as trading stock or, in any event, the resulting loss was a business loss deductible under s. 51. The dividend received was assessable income under s. 44 and rebatable under s. 46. Sections 26 (a) and 52 did not justify treating this ordinary business dealing as a separate profit-making scheme and deducting the dividend from the loss claimed on sale.

Jurisdiction
Australia
Procedural Posture
Income Tax Appeal / Appeal to the High Court From a Decision of Windeyer J Dismissing the Taxpayer's Appeal Against Its Assessment for the Year of Income Ended 30 June 1965.
Outcome
Appeal allowed with costs.
Legal Topics
['income Tax' 'allowable Deductions' 'trading Stock' 'share Dealing' 'dividend Stripping' 'assessable Income' 'rebate on Dividends' 'profit Making Undertaking or Scheme' 'capital Loss Versus Revenue Loss']
['taxation Law'] ['income Tax' 'allowable Deductions' 'trading Stock' 'share Dealing' 'dividend Stripping' 'assessable Income' 'rebate on Dividends' 'profit Making Undertaking or Scheme' 'capital Loss Versus Revenue Loss']

Case Brief

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Procedural Posture

Income Tax Appeal / Appeal to the High Court From a Decision of Windeyer J Dismissing the Taxpayer's Appeal Against Its Assessment for the Year of Income Ended 30 June 1965.

Legal Issues

  1. 1 ["Whether the purchase and sale of the Macgrenor shares formed part of the taxpayer's business as a dealer in shares or were a capital transaction outside that business." 'Whether the Macgrenor shares were trading stock for the purposes of the Income Tax Assessment Act provisions dealing with trading stock.' 'Whether the loss on sale of the Macgrenor shares was deductible under s. 51 or s. 28 (3).' 'Whether s. 26 (a) and s. 52 applied so that the dividend received should be taken into account in computing the profit or loss from a profit-making undertaking or scheme.']

Ratio Decidendi

By majority, the appeal was allowed because the Macgrenor share transaction was part of the taxpayer's business as a dealer in shares and was of a trading, not capital, character. The shares were treated as trading stock or, in any event, the resulting loss was a business loss deductible under s. 51. The dividend received was assessable income under s. 44 and rebatable under s. 46. Sections 26 (a) and 52 did not justify treating this ordinary business dealing as a separate profit-making scheme and deducting the dividend from the loss claimed on sale.

Court Disposition

Appeal allowed with costs.

Orders

  • ['Appeal allowed with costs.' 'Judgment of Windeyer J. set aside.' 'In lieu thereof order that the appeal be allowed with costs.' 'Assessment remitted to the Commissioner for reassessment in conformity with the reasons for judgment.']