Lunney v Commissioner of Taxation [1958] HCA 5

BAIR co TALS Ae SAR? 478 HIGH = a ee dy fm, By Bho a ar & Road Pry Lid i 167 Spat bad Cons HAIR Feet Meio & Eee eae ane ae Anta (hp 40 AURSI0" , Breet Hea ak 4 pam | tg ak Gas, (ails Gea, oa A L41GH COURT OF AUSTRALIA.] fh a TC Appl igen Rou g rer 'eh ror, Pen ® LUNNEY Arltiors" As 00352" Goo ss Are Fir ce 11.374 \%o07) AND Ey Sf COMMISSIONER OF TAXATION OF THE

feral \ Clmmissioner

ston Gesore JoVO8 ECR oud eer, "Soon & FCT. 3002) 51 Cons FCT v Px

wale"

Dised FCT v Payne (1399) 90FCR

A eH (2000 MATA 6 Davis CECT. (ig 44-aTR

H.C. or A.

1957-1958. ee 1957,

Sypyey, Nov. 26-28;

1958, MELBovRNE, Mar, 11.

Dixon C.5.,

McTiernan,

| Williams, Kitto and 'Taylor JJ.

Caszs Srarep.

Lunney against an assessment to income tax made by the , missioner of Taxation in respect of the year ended 30th June I

COMMONWEALTH OF AUSTRALIA

e(2002) 51 ATR 1122

HAYLEY . : : s é : FA ?

AND

COMMISSIONER OF TAXATION OF THE R COMMONWEALTH OF AUSTRALIA. Income Tax (Cth.)—Allowable deductions— Losses and outgoings . . « i gaining or producing assessable income or . . . necessarily incurred in on a business for the purpose of gaining or producing such income" —I in receipt of wages—Professional man carrying on practice—Claim by en deduct fares paid in journeys to and from place of work from and to residence—Whether deductible—Income Tax and Social Services Co Assessment Act 1936-1956 (No. 27 of 1936—No. 101 of 1956), a. 51

Fares paid by taxpayers, whether employed or carrying on b their own account, in travelling day by day from their homes to their p of employment or business and back again are not deductible exp suant to s. 51 (1) of the Income Tax and Social Services Contribution. 'ment Act 1936-1956 allowable against the assessable income earned in employment or business.

So held by Dizon C.J., Williams, Kitto and Taylor JJ., McTiernan senting. <

Lunney v. Commissioner of Taxation of the Co Australia.

In an appeal to the High Court of Australia by Kenneth

L.R.] OF AUSTRALIA.

| Court of the High Court substantially as follows :—1l. The nt is a ship's joiner by occupation and was employed in that

called "the company '?) for the whole of the period Ist July 6 to 30th June 1957. 2. The appellant's hours of employment ere from 7.45 a.m. to 4.30 p.m. daily Mondays to Fridays. He required to report at the office of the company at no. 11 Darling Harbour, both at the commencement and at the completion of each iy'swork. From the said office he travelled at the expense of the company to various parts of the Port of Sydney to carry out his work. . At all material times the appellant resided at 64 Parr Parade, wweena, near Dee Why, an almost entirely residential suburb of Sydney, a large proportion of the working population of which ravels to and from the city daily for the purpose of getting from respective residences to their places of employment and ning therefrom to their respective residences. The approximate distance between Narraweena and no. 11 Darling Harbour is fourteen miles. 4. Throughout the period from Ist July 1956 to _ June 1957 on days on which the appellant worked at his oyment as aforesaid, he travelled from his said residence at raweena to the office of the company at Darling Harbour before a.m. and travelled from the said office to his said residence after pm. During the said period he travelled daily by omnibus ited by the New South Wales Government Transport Depart- nent on the Narraweena-Wynyard station route at a total cost to of sixty-two pounds (£62). The distance between his residence the point where he boarded or alighted from the omnibus and 'distance between the office of the company and Wynyard he covered on foot. The sole purpose of the appellant's g journey as aforesaid is to get from his residence at Narra- to the said office of the company at no. 11 Darling Harbour, to enable him to fulfil the requirement of reporting at the said f the company at the commencement of each day's work, the sole purpose of the appellant's afternoon journey as afore- aid is to get from the said office of the company to his residence at ena. 5. In his return of income for the year ended 30th e 1957 the appellant claimed the said sum of sixty-two pounds }) a8 a deduction from his assessable income. 6. By notice of ment dated 29th July 1957 the respondent assessed the ant to income tax and disallowed the claim for deduction from able income of the sum of sixty-two pounds (£62). 7. On th July 1957 the appellant lodged an objection in writing against

to J. on 21st October 1957 stated a case for the opinion of the H. ©. or A.

1957-1958. ——

Luyyey v. Conmts- SIONER OF TAXATION.

HH. C. or A.

1957-1958. pester; Lunney v. Commis- SIONER OF TAXATION.

HIGH COURT

the said assessment and claimed the deduction of the said sixty-two pounds (£62) on the grounds :—* (i) that such expe is an outgoing incurred in gaining and producing my income or necessarily incurred in carrying on my business fo purpose of gaining and producing such income. (ii) that expenditure is not a loss or outgoing of a capital, private or dom nature nor was it incurred in relation to the gaining or produet of exempt income. (iii) that without limiting the generality of foregoing grounds, such expenditure is deductible either wholly in part from the assessable income under the terms of s. 51

s. 53 and/or s. 54 of the Income Tax and Social Services Contributio Assessment Act 1936-1956". 8. On 30th July 1957 the responde

said objection. 9. On 30th July 1957 the appellant in requested the respondent to treat the objection as an appeal a forward it to this Court, and the respondent on Ist August I! forwarded it to this Court accordingly. 10. The said appeal co on to be heard before me and the facts hereinbefore stated agreed between the parties, I state the following question of law fi the opinion of the Full Court of the High Court of Australia. (

in part from the assessable income of the appellant Income Tax and Social Services Contribution Assessment Act 1956 ?

Hayley v. Commissioner of Taxation of the Commonwe Australia.

In an appeal to the High Court of Australia by Nigel Hayley against an assessment to income tax made by the Com sioner of Taxation in respect of the year ended 30th June 1 Kitto J. on 21st October 1957 stated a case for the opinion of | Full Court of the High Court substantially as follows :—1. appellant is a dentist by profession and has carried on his profe on his own account throughout the period Ist July 1956 to June 1957 at his rooms at 183 Macquarie Street Sydney. 2. appellant attended at his rooms daily Mondays to Fridays b the hours of 8.30 a.m. and 5.00 p.m. for the purpose of ca his profession. 3. At all material times the appellant 34 Woodside Avenue Strathfield. Strathfield is an almost residential suburb of Sydney, and a large proportion of thi population living there travels to and from the city daily purpose of getting from their respective residences to the p their employment and returning therefrom to their re

OF AUSTRALIA.

ie Street Sydney is eight miles. 4. Throughout the period n Ist July 1956 to 30th June 1957 on days on which the appellant d on his profession at his rooms at 183 Macquarie Street iney, he travelled from his said residence at Strathfield to his rooms in Macquarie Street before 8.30 a.m. and travelled from said rooms to his said residence after 5.00 p.m. During the said period he travelled daily by electric train between Strathfield St. James railway stations at a total cost to him of twenty-eight nds (£28). The distance between his residence and Strathfield lway station and his rooms and St. James railway station he ered on foot. The sole purpose of the appellant's morning journey as aforesaid is to get from his residence at Strathfield to his ooms at 183 Macquarie Street Sydney, and to be available at the aid rooms to carry on his professional practice, and the sole purpose the appellant's afternoon journey as aforesaid is to get from his ms at 183 Macquarie Street Sydney, to his residence at Strath- 5. In his income tax return for the year ended 30th June 7 the appellant claimed the said sum of twenty-eight pounds as a deduction from his assessable income. 6. By notice of ent dated 29th July 1957 the respondent assessed the to income tax and disallowed the claim for deduction from le income of twenty-eight pounds (£28). 7. On 29th July 1957 the appellant lodged an objection in writing against the said ssessment and claimed the deduction of the said sum of twenty- pounds (£28) on the grounds :—' (i) that such expenditure outgoing incurred in gaining and producing my assessable e or necessarily incurred in carrying on my business for the of gaining and producing such income. (ii) that such ure is not a loss or outgoing of a capital, private or domestic nor was it incurred in relation to the gaining or producing of

the appellant with written notice that he had disallowed the said bjection. 9. On 30th July 1957 the appellant in writing requested 'respondent to treat the objection as an appeal and to forward it s Court, and the respondent on Ist August 1957 forwarded it is Court accordingly. 10. The said appeal coming on to be rd before me and the facts hereinbefore stated being agreed en the parties, I state the following question of law for the n of the Full Court of the High Court of Australia :—(a) Is dsum of twenty-eight pounds (£28) deductible either wholly or from the assessable income of the appellant under the Income and Social Services Contribution Assessment Act 1936-1956 ?

The approximate distance between Strathfield and H. ©. or A.

1957-1958.

Luyyey v. Commis- SIONER OF TAXATION.

H.C. or A.

1957-1958. oer) Louxney Commis- SIONER OF Taxation.

HIGH COURT (1957.

Dr. F. Louat Q.C. (with him A.J. Rogers), for the appellant in e case stated. In the light of the tests enunciated in Ronpibon N.L. and Tongkah Compound N.L. v. Federal Commissic Taxation (1); Amalgamated Zine (De Bavay's) Ltd. v. Fe Commissioner of Taxation (2); W. Nevill & Co. Ltd. y. Fi Commissioner of Taxation (3), and Charles Moore & Co. (W.A. Ltd. v. Federal Commissioner of Taxation (4) as to what e constitutes an allowable deduction within s. 51 (1) of the Ii Tax and Social Services Contribution Assessment Act it is not to exclude travelling expenses from the first part of s. 51 (1), le aside for the moment whether they in fact fall within the exemp portion of the sub-section. Such expenses are both incidental relevant because they are a circumstance in the condition of employ ment; the worker or professional man must present himself at place where the work is to be performed in order to earn the incom In the second test enunciated in the Ronpibon Case (5) the " occasion " does not mean "' cause"; the occasion of the outgoin means the facts or circumstances giving rise to the outgoing. | that be a correct paraphrase of the word " occasion " then it woul seem to be a little less precise logically than the word " caus So read this test precisely describes the nature of these particul outgoings. The facts or circumstances giving rise to the outg are the facts or circumstances of the income-producing operat the operation has to be carried on and the taxpayer has to be to carry it on. It is the employment or business which the outgoing—it is a condition of being able to earn. discrimen laid down by the Court it must be irrelevant to say the journey takes place before the work commences and afi

to work and from work to home is not in itself one of the and direct income-earning operations. There is no necessary poral connection between the outgoing and the income-p

activity. [He referred to Federal Commissioner of Taxation Gordon (6); Herald & Weekly Times Ltd. v. Federal Co of Taxation (7).| In matters of this nature the board of formerly disallowed expenditure such as this on the basis of vy. Colquhoun (8) and similar authorities, but in more recent ti it has tended towards disallowance on the basis that this ki

(1) (1949) 78 C.L. (2) (1935) 54 C.L.R. 309. (3) (1937) 56 C.L.R. 290, at p. 305. 4 4 (4) (1956) 95 C.L.R. 344, at pp. 349- (8) (1925) 1 K.B. 725, at pp. 7 351. 732, 733 ; (1926) A.C. 1, at

R. 47, at pp. 55-57. 295, at pp. 307,

OF AUSTRALIA.

)s, 51 (1). The travelling expenses here in question are not of a tic nature within the meaning of the exception to s. 51 (1). of such a nature the expenditure must pertain or relate to the Nor are they of a private nature within the exception. nditure normally private which finds its occasion in the roducing activity and which is incidental and relevant o is not in that setting a private outgoing. [He referred to Commissioner of Taxation v. Green (1); Yarra Glen and e Hunt Club v. Federal Commissioner of Taxation (2); In re e Income Tax Acts (3); Re Adair (4), and Shorter Oxford Dictionary, 3rd ed. reprint. (1950)—" private".] That is ng to be attributed to the word " private " in s. 51 (1), expenses here cannot be considered " private ".

Sir Garfield Barwick Q.C. (with him E. N. Dawes), for the respon- each case stated. Amounts spent on fares whether to an it for a master or to a business amounting to self-employ- it are not outgoings incurred in gaining an assessable income or ssarily incurred in carrying on a business, Further they are of a private or domestic nature within the exception to (1). The activity of gaining the assessable income in each case cing, and it cannot be said that the outgoings for fares were working. Despite the various tests referred to by the nts in the cases cited one comes back ultimately to the words Section which require that the expenditure be made in or in earrying on, On any proper analysis there is nothing eduties, or anything incidental to the duties, of the employment self-employment which is the occasion for the expenditure. ity to go to the employment from some place is not

d by the employment or its nature or duties but by the place The employment is unconcerned and unconnected with ce of dwelling which is entirely a matter for the employee. loyee travels really to give himself employability ; it is his capacity to work and the expenditure is to give him that The present expenditure does not fall within any of the ciated by this Court in the various cases cited by the [He referred to In re The Income Taw Acts (5); Cook (6); Revell v. Directors of Elworthy Bros. & Co. Ltd. (7) ;

!) (1950) 81 C.L.R. 313, at pp. 317, (5) (1903) 29 V.L.R. 298, at pp. 303, 18, 319, 304. 90 C.L.R. 348, at p. 352. (6) (1887) 2 Tax Cas. 246, at p. 248 ; 29 V.L.R. 298, at pp. 304, (1887) 4 T.L.R. 164, 6, 307. (7) (1890) 3 Tax Cas. 12.

- (CN.) 42.

483,

e is excluded as private expenditure by the exception H. ©. or A.

1957-1958.

Luyney a Comars- SIONER OF Taxation.

H. ©. oF A.

1957-1958. as

Luynzy v. Commis- SIONER OF TAXATION.

HIGH COURT

Friedson v. Glyn-Thomas (1); Andrews v. Astley (2) ; tt Colquhoun (3); Nolder v. Walters (4); Blackwell v. inal ( Newsom v. Robertson (6) ; Burton v. Rednall (7).] |The author of other Commonwealth countries and the United States are to tl like effect. [He referred to Cunningham on Taxation Laws of Ne Zealand 3rd ed. (1956) p. 493; Land and Income Tax Act (19 (N.Z), 8.111] [Drxon C. J. referred to A. v. Commissioner for Inland Reve (W.Z.) (8) . (He referred to Income Tax Act 1948 (Can.), ss. 11, 12; de Ministry of National Revenue (9); Leigh v. Ministry of Nation Revenue (10) and Burt v. Ministry of National Revenue (11) ; Inco Tax Act 1941 (Sth Africa), s. 11, 12, B. B. J. Blann on Principle South African Income Tax (1955), p. 114; Phillips v. Keane (12) Standard Federal Tax Reporter (U.S.), (1956), vol. 1, pars. 13504 1350.0722.] There is a certain universality in this problem. English authorities show that the travelling to the place of emplo ment or of labour arises out of and is occasioned by the place residence, whether one of choice or dictated by circumstances, the travelling is not causally related to the place of employm labour at all. The other authorities also identify the expe with the place of residence rather than the place of employ of labour. On general considerations the expenditure in travelli to the place of employment is not in any relevant sense occas by or determined by the employment, but arises basically from | fact of residence at a place remote from the employment. If wrong, then this expenditure is no more than of a private or nature. [He referred to Metropolitan Water Board y. Oo Patents Ltd. (13).] The reasoning which would support the vi that the outgoing was incurred otherwise than in gaining | assessable income would also tend to show that it was of a P iy or domestic nature. [He referred to Federal Commissioner Taxation v. Green (14).| In the passage cited the Court was 0 saying that the outgoing in that case was necessarily within first limb of s. 51 (1) and only taken out by virtue of the e

(1) (1922) 8 Tax Cas. 302, at pp. 304, (6) (1953) Ch. 7, at pp. 15, 16, 17. 305 ; (1922) 128 LT' 34,aatp.28. (7) (1954) 35 Tax Cas. 439, at pel

(2) (1924) 8 Tax Cas. 589, at p. 591. (8) (1953) 10 A.T.D. 333. ,

(3) (1925) 1 K.B., at pp. 734, 737; (9) (1950) 2 Tax A.B.C. 199. (1926) A.C., at pp. 5, 6, 8, 9. (10) (1953) 8 Tax A.B.C. 43.

(4) (1930) 15 Tax Cas. 380, at p.387; (11) (1953) 8 Tax A.B.C. 157. (1930) 46 T.L.R. 397, at p. 398. (12) (1925) 2 LR. 48.

(5) (1945) 26 Tax Cas. 468, at p.470; (13) (1911) 2 K.B. 38, at p. 40. (1945) 2 All E.R. 655, at pp. 656, (14) (1950) 81 57.

LR] OF AUSTRALIA. 495 ; was because of the closeness of the two ideas that the judgment H.C. or A. the form it did. Re Adair (1) was based upon the Land and a Tax Assessment Act (1895) (N.S.W.), s. 28. Senile? F. Louat Q.C., in reply. cowie Cur. adv. vult. Feranon,

ay to their regular place of employment or business and back ir homes are deductible expenses allowable against the ble income earned by the employment or business.

th in Australia and in England the view has always prevailed expenses of travelling from home to work or business and back n are not deductible. An explanation of how this came about land is given by Denning L.J. in Newsom v. Robertson (2). position as it has been understood to be is stated in the work e late Dr. Hannan, " Principles of Income Taxation" (1946) 433. His statement, no doubt, is brief but really there g substantial to add to it whether by way of reasoning or

have changed ; the incidence of income tax greatly differs scope and weight from its incidence in the days when the s settled ; possibly, the justice of the traditional legal view more open to question and certainly its financial significance a motive for questioning it. Moreover s. 51 (1) of the Tax and Social Services Contribution Assessment Act 1936- 6 is not quite in the same terms as the corresponding previous tments. The Court has explained the differences in Ronpibon

NL. & Tongkah Compound N.L. v. Federal Commissioner of [acation (3) but the differences are hardly material to the question. The question having been agitated it became necessary to turn

he Australian authorities by which it was settled long ago. It 'surprising to find how few they were and that they depended upon their persuasive authority than their imperative et. But the judgment of Judge Murray in Re Adair (1) was unced sixty years ago and the dicta of a' Beckett and Hodges JJ. Victorian Supreme Court in Re Income Tax Acts (4) implied

) (1898) 4 A.L.R. (O.N.) 42. (3) (1949) 78 C.L.R. 47, at pp. 55-57. 1 eS 7, atppp.15, 16; (1953) (4) (1908) 29 V.L.R. 298 ; 25 A.L.T.

Tax Cas. 452, at pp. 463, 464.

delivered one judgment relative to both cases stated Mar. 11, 1958.

H. ©. or A.

1957-1958. Ww

Lunney v. Commas- SIONER OF 'TaxaTION.

Dixon OJ.

HIGH COURT C

the same view over fifty years ago. These views have re unquestioned up till thiscase. Therelevant provisions ofthe Income Tax Acts are not in the same terms as those of the law, but the whole course of English authority involves a conclusion. To escape from the course of reasoning on which | decisions proceed requires the taking of refined and rather it

stantial distinctions. I confess for myself, however, that matter were to be worked out all over again on bare reason, I have misgivings about the conclusion. But this is just y think the Court ought not to do. It is a question of how an puted principle applies. Its application was settled by old au long accepted and always acted upon. If the whole subject be ripped up now it is for the legislature and not the Court to de I therefore would answer the questions in the special cases sums respectively mentioned are not deductible either wholly or part.

McTiernan J. The question which is stated for the Cou opinion concerns fares incurred by the taxpayer for ti bus from Narraweena, a suburb of Sydney, at which he the waterfront at which his employment as a ship's join carried on. The distance from Narraweena to the city is fo ur miles. It is a residential suburb. The fares were paid to en

expense of coming back to his home after leaving off wi day. The total amount of fares which he paid on all those oce in the financial year was £62. The question for the Court is this sum is an allowable deduction under the Income Tax and Services Contribution Assessment Act 1936-1956. If it is, requires that a deduction of £62 should be made from the ) assessable income in calculating his taxable income.

The taxpayer's employers made him no allowance to cover and he was not paid for time occupied by travelling from his to the employment. It does not appear that the rate of to workmen in his trade is influenced by the consideration may incur the expense of travelling to their work. The ti did not carry on at home or in its vicinity any pursuit for producing assessable income. The income he earned by his é ment was assessed to tax.

His employment was not a business for the purposes of This is shown by the definition enacted in s. 6 (1). Section not, however, limited to deductions from income derived |

OF AUSTRALIA.

on a " business": Federal Commissioner of Taxation v. (1). The question for decision depends on the words of ) pointing to " all losses or outgoings to the extent to which are incurred in gaining or producing the assessable income " as allowable deductions. The only exception which has become for present purposes is that applying to outgoings " of a ite or domestic nature ". the case of Ronpibon Tin N.L. and Tongkah Compound N.L. v. Commissioner of Taxation (2) the Court said in reference to (1) :—* For expenditure to form an allowable deduction as an going incurred in gaining or producing the assessable income it be incidental and relevant to that end. The words ' incurred or producing the assessable income' mean in the course gaining or producing such income— . . . In brief substance, within the initial part of the sub-section it is both sufficient d necessary that the occasion of the loss or outgoing should be ound in whatever is productive of the assessable income or, if none e produced, would be expected to produce assessable income - 8). These tests were cited in the judgment in Federal Com- oner of Taxation v. Green (4) and governed the decision of In that case the Court decided that the words, " incurred in g or producing the assessable income " applied to an amount id by the taxpayer for train fares. The payment of this amount | occasioned by travelling done before and after the time in hich the assessable income was actually earned. The decision is it because in the present case the taxpayer has to meet ment that all his assessable income was derived from the yment in question and the fares which he claims as a deduc- on were paid going to that employment and returning home from This argument proceeds upon the view that the word "in" in 1) requires to be narrowed by construction to mean only a tion of time or place and that it cannot be extended to aim, object t se. To read the word as signifying such a relation as aim, et or purpose would not be contrary to usage (see Shorter | English Dictionary, vol. 1, p. 573). 'In Ward & Co. Ltd. v. ioner of Taxes (5) the rod "in" was read as meaning " in a context similar to that which is now being considered. "my part, I cannot explain the construction of the words med in gaining or producing the assessable income " which is

81 C.L.R., at p. 319. (4) (1950) 81 C.L.R. 313.

(5) (1923) A.C. 145, at p. 149.

H. C. or A.

1957-1958. Ww

Luyxey v Commis- SIONER OF 'TAXATION.

'McTiernan J.

H. C. or A.

1957-1958. eS)

Lunnry v Commis- SIONER OF 'TAXATION.

McTiernan J.

HIGH COURT

set out in Ronpibon Tin N.L. and Tongkah Compound N.L. v. Commissioner of Taxation (1) on the basis that the Court y dissociated the relation signified by "in" from any elem purpose. Indeed the Court spoke of the words "in gain producing the assessable income " as expressive of an " end", Court said the operation of those words is " very wide" (2) approximates to the meaning of " incurred in carrying on a b for the purpose of gaining or producing such income " (3).

Returning to the case of Federal Commissioner of Taxation Green (4). The taxpayer claimed as a deduction, among o expenses, a proportion of the train fares which he paid on an ocea he went from his home in Brisbane to North Queensland to in and supervise his shop properties in that part of the State. Heh also income-producing interests in Brisbane, and managed all own affairs, maintaining for that purpose "a properly equi office at his residence". The Court decided that the Propo tion the train fares which he claimed as a deduction " was in relation to the management of the income-producing enterpri the taxpayer " (5). The management of the properties in Queensland involved inspecting and supervising them. These the purposes of the journey northward. It is obvious that t taxpayer was not managing, inspecting or supervising the proper while travelling on the train. The Court took the view that ap of the train fares was "incurred in gaining or producing" assessable income of the taxpayer. He claimed only a part as he conceded, the journey was made also for purposes ou gaining of assessable income. The Court said : i terial that there might be a difficulty in holding that the a was carrying on in a continuous manner an identifiable business " ( Hence that case is one in which expenses of travelling from the t payer's residence to a place where he had other income-prod activities were held to have been incurred " in gaining or produ the assessable income". Case No. 59 (6) is analogous. $

Case No. B107 (7) is one where the taxpayer travelled beti two places of employment. These were an accountant' and the University. The board of review decided that the expe of travelling from one place of employment to the other "ineurred in gaining or producing the assessable income" 4 that they formed an allowable deduction under s. 51 (1 taxpayer was not performing a duty of either employment |

(1) (1949) 78 C.L.R. 47. (5) (1950) 81 C.L.R., at p. 319 (2) (1949) 78 C.L.R., at p. 56. (6) (1950) T.B.R.D., 218. (3) (1949) 78 C.L.R., at p. 57. (7) (1952) T.B.R.D., 536. (4) (1950) 81 C.L.R. 313.

OF AUSTRALIA.

travelling. He had in that period ceased performing any of his employment as an accountant and had not entered performance of any of his duties as a lecturer. decision of the Supreme Court of Victoria in the case In re Tax Acts (1) was given on different wording but, in my it assists the taxpayer to maintain that the cost of travelling his employment was "incurred in gaining" the assessable thereof. The Court said in Federal Commissioner of Taxation (2) as to private or domestic outgoings that " such expen- is expressly excluded from deductibility by the final words first sub-section of s. 51" (3). This express exception would to imply that the words " all losses or outgoings to the extent ch they are incurred in gaining or producing the assessable ome" were contemplated as having a wide operation and ble of including certain expenditure of a private or domestic ture, if there were no express exception of such expenditure. he provisions of " Schedule E r. 9" (8 & 9 Geo. 5 c. 40) are very nt from s. 51 (1). The decisions on the former do not assist the present problem. The Court did not have recourse decisions when explaining the operation of s. 51 (1) in the cof Ronpibon Tin N.L. and Tongkah Compound N.L. v. Federal er of Taxation (4). With the comment made by the that the distinctive words of s. 51 (1) "have a very wide ation " (5) there ought to be noticed the observation made by Blanesburgh in Ricketts v. Colquhoun (6) onr. 9: " Undoubtedly striking characteristic is its jealously restricted phraseology, e of it repeated to heighten the effect" (7). Vaisey J. spoke to he same effect in Lomax v. Newton (8). I think that the view ch Warrington L.J. took of the scheme of r. 9 in his dissenting ent in Ricketts v. Colquhoun (9) approximates to the meaning provisions of s. 51 (1), whereas the same thing could not ly be true of the explanation made by Lord Blanesburgh. i L.J. said in reference to r. 9: " Now I think, and I on this the Attorney-General agrees, that the words ly' and ' necessary' in the rule do not mean necessary ily in the abstract, but that they mean necessary in to the circumstances of the individual concerned, the holder office, and in regard to the ordinary usages of mankind at n¢ in the history of the world. If that is so, and if he is unable R. 298. (6) (1926) A.C. 1. R. 313. (7) (1926) A.C., at p. 7. R., at p. 318. (8) (1953) 1 W.L.R. 1123, at p. 1125.

R. 47, (9) (1925) 1 K.B. 725. .LR., at p. 56.

Hi. ©. or A.

1957-1958. YW

Luyney v. Comatts- SIONER OF Taxation,

'McTiernan J,

HH. C. or A.

1957-1958. ey,

Luxxey v. Commis- SIONER OF Taxation.

'McTiernan J.

HIGH COURT (1957. \

to enter upon the performance of his duties without i under the circumstances in which he is properly situated, expense of travelling from his home to the borough, and if in same way there is cast upon him, in order efficiently to pe duties, extra expense by going to a hotel in Portsmouth, it s me that those are expenses incurred in the performance of his duti He cannot perform his duty without incurring them, and in princip] I cannot see the difference between an expense incurred is actually performing his duties, and one incurred for the purpos of enabling him to perform his duties" (1). 7

In my opinion it is an unduly narrow construction of the ir part of s. 51 (1), in the case of an employment, to confine its op to expenditure made by the taxpayer within the bare physical o1 temporal limits within which he performs his work or labour and disregard any expenditure made outside those limits even th it has a necessary relation to the purpose of earning income for the taxpayer carries on the employment. It is shown by the st case that the taxpayer could not in the circumstances under he was situated earn any assessable income by his employ without incurring the cost of travelling which he claims to be an allowable deduction. I cannot see the difference in principle b an expense incurred in gaining income and one incurred n for the purpose of gaining it.

If the facts found in the stated case prove that the expenses of travelling from the taxpayer's home to his employment were ineurr in gaining the income of such employment, it would follow the expenses of travelling back to his home were similarly re to the earning of that income. Somervell L.J., as he then was, Newsom v. Robertson (2) said: "I doubt if it is helpful to con sider the journeys separately. It is the expenses of going to and fro which have to be considered. It would be an impossible result hold that one journey was ' wholly and exclusively ' and the not" (3). The principle underlying that statement is the right one to apply here.

Holroyd J. said in the case In re The Income Tax Acts (4): may say I do not understand the difference between the and the returning in such cases. If he goes to Melbourne, he comes back to where he lives; and in my opinion the expenses going and returning are both necessary for the purpose of earning the money. I do not suppose that it is expected that, when 4 goes up to Melbourne to earn money, he should remain there ;

(1) (1925) 1 K.B., at pp. 735, 736. (3) (1953) 1 Ch., at p. 13. (2) (1953) 1 Ch. 7. (4) (1903) 29 V-L.R. 298.

100 C.L.B.] OF AUSTRALIA.

is never to go back to his residence ; that he is to be permanently ere because he earns a few pounds as a director there" (1). In case, as in Federal Commissioner of Taxation v. Green (2) taxpayer carried on business at his residence. In the present the taxpayer did not. That is the fine distinction on which present case turns. Conceding even that the travelling expenses

ion were incurred by the taxpayer in gaining or producing - the income from his employment, it is said against him that they He not allowable deductions because they are expenses "of a

e

vate or domestic nature." This argument is founded entirely

m the taxpayer's home and returning to it. It disregards the

ance of the purpose of the travelling. The point which is in mite is similar to that which a'Beckett J. reserved in the above- tioned Victorian case. He said: "I am not saying what the ference would be if he were a mere suburban resident coming and going from the place where he resided, and which he occupied "without any reference to his carrying on business there ". (3) Why expenses of travelling between home and a place where Je income is earned be " private" or " domestic", if no i carried on at home, but allowable as a deduction if some bu is carried on at the place which is the taxpayer's home 'and it does not cease to be his home ? a' Beckett J. took as a point of distinction that in the latter case the taxpayer's " presence "is requisite for the purpose of his carrying on of the businesses from which his taxable income is produced" (3). In regard to _ the same point Mr. R. R. Gibson said in case No. 27 (4): "' Where the assessable income is produced or earned by activities carried on by the taxpayer in several places the taxpayer's expenses of travelling from any one to any other of those places for the

ad of engaging in those activities are surely just as much - in gaining the assessable income as, and no more of a

private nature than, are the expenses directly arising out of those activities. And, in my opinion, it does not matter whether the - activities in any of those places do or do not amount to the - carrying on of a business: if the taxpayer were a director of two - companies carrying on business in different States, or if he were an employee in one place and the proprietor of a business in another, it would still be prima facie necessary for him to go from one State or place to the other for the purpose of gaining or producing his assessable income. Nor, in my opinion, would it be a material

(1) (1903) 29 V.L.R., at p. 304. (3) (1903) 29 V.L.R., at p. 306. (2) (1950) 81 C.L.R. 313. (4) (1945) 12 T.B.R.D. 259.

m

H. C. or A.

1957-1958. ad

Lunney v. Commis- SIONER OF Taxation.

'MeTiernan J.

H.C. or A

1957-1958. ES

Louyyey a Commas- SIONER OF 'Taxation.

MeTiernan J.

HIGH COURT

in which he was carrying on income-producing activities. In circumstances it would be advantageous to the gaining or p

places, one obvious advantage being that he would save the expen which he would have otherwise incurred, of travelling between h home and that place. This leads me to the view that if a ta lives at a place where his presence is required from time to time the purpose of engaging in income-producing activities, his expen of travelling between that and any other place where his pi is required for similar purposes not only are incurred in g producing his income but also should not be held to be of a nature merely because it suits his private convenience to live he does or even because the selected place of residence is, for pri purposes, the most suitable of the several places at which he ca on income-producing activities" (1). However, in that case, } Gibson dissented. It appears that he relied on the Victorian c cited above. But the majority of the board, Mr. J. P. Hannan Mr. £. F. Hamilton, thought that having regard to the decision the majority in Ricketts v. Colquhoun (2) the right view to take the expenses allowed as deductions in the Victorian case was. th they were " private" or " personal " outgoings.

In case No. 59 (3), a board of review said that the decision in tl case of Federal Commissioner of Taxation v. Green (4) shows the dissenting view of Mr. Gibson was right and they approved o what he said in the passage cited above. It would seem that case with facts similar to Cook v. Knott (5) or Ricketts v. Colquhoun | arose for decision under s. 51 (1), the taxpayer would find decision in Federal Commissioner of Taxation v. Green (4) the train fares of much assistance to him.

The view that the expenses of travelling from home to employn are "of a private or domestic nature" goes back to Cook v Knott (5) which was decided in 1887. Hawkins J. said in that ¢ "T cannot see any difference in this case and the case of a m having an office in London, who chooses for his own conve ( pleasure or domestic necessity, as the case may be, to live occupy a house at Brighton, and pay his ticket up to town every day It was never contemplated that they should be called expe necessarily incurred in the transaction of his business. I do not se if he is staying 300 miles off, and comes up specially to attend to

(1) (1945) T.B.R.D., at pp. 266, 267. (4) (1950) 81 C.L.R. 313. (2) (1926) A.C (5) (1887) 2 Tax. Cas. 246. (3) (1951) 1 T.B.R.D. (N.S.) 218.

OF AUSTRALIA.

once a week, why he should not charge that, if his contention ect" (1) These remarks have no relevance to the modern of residing in a suburb and working in the city or in another utb. In Ricketts v. Colquhoun (2) all that was said in reference k v. Knott (3) was an observation by the Lord Chancellor had stood for thirty-eight years and the rule on which s decided had been re-enacted. Lord Blanesburgh said regard- the expenses in question in Ricketts v. Colquhoun (2): " Rather they expenses incurred by him" (the taxpayer) " because, for his own purposes, he chose to live in London ; in other words y are purely personal to himself" (4). It is a mistake to d this as a reaffirmation of what Hawkins J. said in Cook v. (3). I think that the explanation which Mr. R. R. Gibson gave in case No. 27 (5) of Lord Blanesburgh's observation is correct. It is important to quote what Mr. Gibson said. "In that case | y. Colquhoun (2) ) it was held that the appellant's expenses 'travelling from London, where he was practising as a barrister residing, to Portsmouth in order to attend to his duties as ecorder of Portsmouth, and of afterwards travelling back to ondon, were not incurred in the performance of his duties as order and were therefore not deductible. The opinion was not expressed that the travelling expenses were of a private nature. 'it would be wrong to read that opinion into Lord Blanesburgh's rk (4) . . . that 'the expenses were incurred by him' (the nt) ' because for his own purposes, he chose to live in Lon- : in other words they are purely personal to himself'. If this ark is read with its context (I refer to the reasoning which ends the statement that the appellant 'was . . . under no obliga- . to continue so to practise while holding his office ') it will seen that what his Lordship meant was that the expenses were urely personal to the appellant because, for his own purposes, he e to practise in London where he lived : they were personal in Sense that his practice was personal " (6).

expenses of travelling from home to work are " private or ic" is that of Murray D.C.J. in Re Adair (7). His Honour's ement was obviously based upon what Hawkins J. said Cook v. Knott (3). It might have been a fair presumption for

kins J. to make in 1887 about the London business man he lived at Brighton for his own convenience or pleasure

(1) (1887) 2 Tax. Cas., at p. 248. (5) (1945) 12 T.B.R.D. 259. C1 (6) (1945) 12 T.B.R.D., at p. 265. (C.N.) 42.

(7) (1898) 4 A.

H.C. or A.

1957-1958. Se

Lunney v. Commis- SIONER OF Taxation.

MeTiernan J.

HH. C. or A.

1957-1958. ey,

Lunney v. Commis- SIONER OF TaxaTION.

McTiernan J.

HIGH COURT

or domestic necessity ; perhaps, a fair presumption for Mi D.C.J. to make in 1898 that an accountant practising in Sydney had decided to live at the suburb of Burwood for similar pri of domestic reasons. But there is no ground for any such p sumption in the facts set out in this stated case. If modern hou conditions and the ordinary usages of the working population taken into account, it would be wrong to presume or infer evidence that an employee who lives at a distance from his empl ment has simply chosen to do so in preference to living in th vicinity of his employment.

Narraweena is according to the facts a residential suburb a working population most of whom are employed in the city When, as under modern conditions, homes are not generally aval able to employees near their employment it is, in m wrong to presume that an employee who resides in an ordinary resi- dential suburb is actuated by some reason such as Hawkins J. tioned. The truth is rather that the employee is concerned having a place of abode, which necessarily becomes the base which he goes and to which he returns in the course of earning livelihood. It is not a correct construction of the situation in y he is placed to say that he lives there to get far away from his em ment, because, if he is unable to reside near it, he needs to n somewhere from which it is possible to get to his employment. Th less time he spends travelling to and from his employment 1 more he is pleased. I do not take the view that the expense such travelling belongs necessarily to the sphere of private o domestic expenditure. It is rather business expenditure cha able to the earnings of the employment—his earnings—to ant from which the taxpayer goes and comes. The expenditure does not provide for any private or domestic need. The expenditure is not in the category of ordinary living expenses. Its p rather to earn income to meet such expenses. I do not take #l view that the result of s. 51 (1) is that the expenses of trave between a home and employment may not be private or dom expenditure because a feature of the home is a room where th taxpayer earns other assessable income, whereas similar trave expenses of a taxpayer who derives all his assessable income the employment to and from which he travels are of an different nature and cannot be regarded as incurred in gaining producing the assessable income, but as expenses of a private 0 domestic nature, even though the latter taxpayer resides within & reasonable distance of his employment, or not so far away that could not be expected that normally a person in his cireumstane

OF AUSTRALIA.

either taxpayer are incurred solely and necessarily for the of travelling to the taxpayer's employment may in all the ; ices of the case be sufficient to justify the conclusion that | expenses are incurred in gaining the taxpayer's income and are ofa private or domestic nature'. In this case that conclusion my opinion amply justified by the facts which are set out in the case.

am of the opinion that the sum in question, £62, was wholly in gaining the taxpayer's assessable income and was not to y extent of a private or domestic nature. It was, therefore, n allowable deduction under s. 51 (1) of the Act. I would answer the question by saying that the sum of £62 is wholly deductible.

ley v. Commissioner of Taxation of the Commonwealth of Australia.

e dental practice which this taxpayer carried on was a business n the meaning of s. 51 (1). He was therefore entitled to rely the alternative words of the sub-section as well as upon those

apply here. I would, therefore, answer the question stated for Court's opinion in the same way.

muestions posed by these two cases stated raise for our eration a matter of general interest in relation to s. 51 of the e Tax and Social Services Contribution Assessment Act 1936- What we are called upon to decide is whether the expenditure ed by each of two taxpayers in travelling to and fro between heir respective residences and places of work are " losses or out- igs" of the description specified in the section and, therefore, ible deductions for the purpose of the Act. The first of the 8, it may be assumed, was an employee in receipt of wages able for services rendered at his place of employment, or else- as directed by his employer, whilst the other carried on in ey the professional practice of a dentist, and each has claimed n his return of income to deduct fares paid during the relevant od for conveyance by public transport from his residence to his of work and from his place of work to his residence.

fact that s. 51 was intended to deal with a great variety of of expenditure made it inevitable that it should be couched ral terms and both that section and its immediate predecessor

live where he resides. The fact that the expenses in the H.C. or A.

1957-1958

ad

Lunney v. Commis- SIONER OF Taxation.

MeTiernan J.

Hi. C. or A.

1957-1958.

Lunnxzy Ca Commis- SIONER OF 'TAXATION.

Williams J. Kitto J. Taylor J.

HIGH COURT iF

have been the subject of judicial consideration on a nu occasions. In terms, the section provides that all losses and goings to the extent to which they are incurred in gaining or p ducing the assessable income, or are necessarily incurred in carry on a business for the purpose of gaining or producing such ineor shall be allowable deductions except to the extent to which losses or outgoings of capital, or of a capital, private, or dom nature. The language is simple enough and, in the main, litt difficulty is encountered in recognising those items of bu expenditure which qualify as deductions. But in the natu things it has been impossible to devise, as a substitute for the of the section, a simple formula which will readily and preci mark the limits of the operation of the section. Yet, in the cou of dealing with individual cases, it has been necessary to de particular attention to the words "in gaining or producing assessable income " and " incurred in carrying on a business for tl purpose of gaining or producing such income" and to bee express precisely what those words mean. For the purpose of advancing the appellants' cases couns naturally enough, seized upon observations which have béen from time to time in attempts to elucidate the meaning of th expressions. In particular, it was said, expenditure is invested wit the requisite character if it may properly be regarded as " ineiden or relevant " to the derivation of assessable income. This e: has been used in a variety of cases where it has been nec deal with problems arising under the section. For inst dealing with the immediate predecessor of s. 51 in Amalgan Zine (De Bavay's) Ltd. v. Federal Commissioner of Taxation (I) was said : " The expression ' in gaining or producing ' has the fo of 'in the course of gaining or producing' and looks rather to scope of the operations or activities and the relevance thereto o expenditure than to purpose in itself " (2). In dealing with the section in W. Nevill & Co. Ltd. v. Federal Commissioner of V4 tion (3) it was said that " it is necessary that the expenditure s have been incurred in gaining or producing the assessable that is the assessable income of the given financial year or account period. This means that it must have been incurred in the cot of gaining or producing the assessable income. It does not qui that the purpose of the expenditure shall be the gaining or produc of the income of that year. The condition the provision é

(1) (1935) 54 C.L.R. 295. (3) (1937) 56 C.L.R. 290. (2) (1935) 54 C.L.R., at p. 309.

R.J OF AUSTRALIA.

iod and is incidental and relevant to the operations or ivities regularly carried on for the production of income " (1). e same expression was again used in Ronpibon Tin N.L. and Compound N.L. v. Federal Commissioner of Taxation (2) it became necessary to solve a problem arising under s. 51. that case it was said that " For expenditure to form an allowable tion as an outgoing incurred in gaining or producing the le income it must be incidental and relevant to that end " (3). s passage was repeated in Charles Moore and Co. (W.A.) Pty. y. Federal Commissioner of Taxation (4). Examination of these however, readily shows that the expression " incidental and nt" was not used in an attempt to formulate an exclusive exhaustive test for ascertaining the extent of the operation of section; the words were merely used in stating an attribute hout which an item of expenditure cannot be regarded as deduc- le under the section. That this is so appears from some of the brief passages already quoted and is made quite clear by considera- of the reasons in the cases referred to. In Ronpibon Tin N.L. Tongkah Compound N.L. v. Federal Commissioner of Taxation (2) » passage quoted above (3) was immediately followed by the ition "' The words 'incurred in gaining or producing the ble income ' mean in the course of gaining or producing such

' (5). Thereafter, it was said: " In brief substance, to come ithin the initial part of the sub-section it is both sufficient and y that the occasion of the loss or outgoing should be found atever is productive of the assessable income or, if none be duced, would be expected to produce assessable income" (6). he context in which they have been used the expressions relied by the appellants have been intended as a reference, not ily to the purpose for which an item of expenditure has been , but, rather, to the essential character of the expenditure Tn each of the cases except the last the expenditure in tion was essentially expenditure of a business character but the on was whether it was e° penditure " incurred in gaining or cing the assessable inco 1e" or necessarily "incurred in on a business for the p rpose of gaining or producing such " whilst in the last-men 'oned case the occasion of the loss stion was properly regarded as an " incident " of the carrying 'the business which produced the taxpayer's assessable income. ) (1937) 56 C.L.R., at (4) (1956) 95 C.L.R. 6, at p. 350.

(5) (1949) 78 C.L.R., at pp. 56, 57. (6) (1949) 78 C.L.R., at p. 57.

ied if the expenditure was made in the given year or account- H- ©. or A.

1957-1958. —

Lonney vw Commis- SIONER OF Taxation.

Williams J. Kitto J. Taylor J.

498,

HH. C. or A.

1957-1958. we

Lusty v. Commis- SIONER OF TaxaTIon,

Williams J. Kitto J. Taylor J.

HIGH COURT

The sense in which the appellants suggest that the e in question in this case was incidental and relevant to the de of assessable income is well illustrated by the observat Holroyd J. in In re The Income Tax Acts (1). Tn that case learned judge was concerned, inter alia, with the question wh a taxpayer was entitled to claim as a deduction expenditure ine in travelling to and fro between his private residence and the ¢ of Melbourne where he performed duties which enabled him to ea fees as a director of a company. His Honour said: " These like the profits of his business, are part of his income, and money which he employs in travelling up to Melbourne in ord earn them is expended for the purpose of enabling him to e income and without paying those expenses, apparently, he not earn it. I may say I do not understand the difference bety the going and returning in such cases. If he goes to Melbourne, comes back to where he lives; and in my opinion the expense going and returning are both necessary for the purpose of e the money " (2). The question in that case was whether expend so incurred by the taxpayer was " wholly and exclusively e for the purposes of his trade" and may, perhaps, be said to substantially from that which arises in the present case. Po if the learned judge had been required to apply the provisio section similar in terms to s. 51 he would have found great in saying that the expenditure had been " incurred in producing" the taxpayer's assessable income. The g

themselves entirely to the other two members of the court in case and do not appear to have found acceptance on any oth occasion on which not dissimilar problems have arisen for ¢ sideration.

The question whether the fares which were paid by the appell are deductible under s. 51 should not and, indeed, cannot be simply by a process of reasoning which asserts that because diture on fares from a taxpayer's residence to his place of é ment or place of business is necess: 'y if assessable income is t derived, such expenditure must b regarded as " incidental relevant " to the derivation of such income. No doubt both of propositions involved in this conte,tion may, in a limited conceded but it by no means follows that, in the words of thes such expenditure is " incurred in gaining or producing the asse income " or " necessarily incurred in carrying on a busin' purpose of gaining or producing such income". It is, of co

(1) (1903) 29 V.L.R. 298. (2) (1903) 29 V.L.R., at p. 304.

OF AUSTRALIA.

yment he will not derive assessable income and, in one sense, es the journey to his place of employment in order that he earn his income. But to say that expenditure on fares is a ite to the earning of a taxpayer's income is not to say that ch expenditure is incurred in or in the course of gaining or producing 'income. Whether or not it should be so characterised depends spon considerations which are concerned more with the essential ter of the expenditure itself than with the fact that unless it is an employee or a person pursuing a professional practice ill not even begin to engage in those activities from which their ctive incomes are derived. problem now before us was to some extent the subject of ation in the recent case of Newsom v. Robertson (1) where, rsuant to the Income Tax Assessment Act 1918 (Imp.), the question as whether railway fares which had been paid by a professional in respect of journeys between his home and his professional ibers constituted " money wholly and exclusively laid out or for the purposes of his profession". It should be men- that in this case the additional fact appeared that the er consistently performed some of his professional duties at me and the case was put as one in which the facts disclosed the expenditure was incurred, not merely in travelling between me and place of business, but, rather, in travelling between place of business and another. Yet the taxpayer's claim to a etion was rejected both in the first instance and in the Court of None of the members of the latter court were prepared to ent to the proposition that the taxpayer's journeys were for the se" of his profession ; in the language of Romer L.J. " The

of the journeys, both morning and evening, is not to enable a n to do his work but to live away from it" (2). The fact that ; taxpayers are free to choose whether they will live at their of work or away from it may appear to invest this statement ha degree of artificiality. But, even in these modern times, they 'have, within limits, the right to choose where their homes shall o that a taxpayer's daily journeys between his home and place 'Work are rendered necessary as much by his choice of a lovality tesidence as by his choice of employment or occupation. And the purpose of such journeys is, at least, as much to enable | to reside at his home as to attend his place of work or business.

'the course of seeking to ascertain the '"' purpose" of such daily ys, Denning L.J. in Newsom's Case (1) made some obvious,

(2) (1953) 1 Ch., at p. 17.

question that unless an employee attends at his place of H. ©. or A.

1957-1958, Ww

Lounney v. Commis- SIONER OF TaxarTIon.

Williams J. Kitto J. Taylor J.

H. C. oF A.

1957-1958. "e

Lounney v Comas- SIONER OF 'TAXaTION,

Williams J. Kitto J. Taylor J.

HIGH COURT i

but nevertheless interesting, observations on this point, He "Tn the days when income tax was introduced, nearly 150 ago, most people lived and worked in the same place. The trad man lived over the shop, the doctor over the surgery, an barrister over his chambers, or, at any rate, close enough to to them or ride on his horse to them. There were no tray expenses of getting to the place of work. Later, as me transport quickened, those who could afford it began to live at distance from their work and to travel each day by railway intoa out of London. So long as people had a choice in the matt whether to live over their work or not—those who chose to live of London did so for the purposes of their home life, because th preferred living in the country to living in London. The cost travelling to and fro was then obviously not incurred for the p of their trade or profession. Nowadays many people have onl} very limited choice as to where they shall live. Business men an professional men cannot live over their work, even if they woul like to do so. A few may do so, but once those few have occup

the limited accommodation available in Central London, there room for the thousands that are left. They must live ou! distances varying from three miles to 50 miles from London. have to live where they can find a house. Once they have fo they must stay there and go to and from it, to their work. simply cannot go and live over their work. What is the of people so placed ? Are their travelling expenses incurred ¥ and exclusively for the purposes of the trade, profession or oc tion? I think not. A distinction must be drawn between li expenses and business expenses. In order to decide into category to put the cost of travelling, you must look to see the base from which the trade, profession, or occupation is cart on. In the case of a tradesman, the base of his trading operatio is his shop. In the case of a barrister, it is his chambers. Once gets to his chambers the cost of travelling to the various courts incurred wholly and exclusively for the purposes of his pro! But it is different with the cost of travelling from his home toh chambers and back. That is incurred because he lives at a dist from his base. It is incurred for the purposes of his living tl not for the purposes of his profession, or at any rate not wl exclusively ; and this is so, whether he has a choice in the mat or not. It is a living expense as distinct from a business © pense " (1).

~ In the course of the argument we were referred to a num cases in which, from time to time, much the same problem has

(1) (1958) 1 Ch., at pp. 15, 16.

OF AUSTRALIA.

n Cook v. Knott (1); Friedson v. Glyn-Thomas (2); Ricketts uhoun (3); Nolder v. Walters (4) ; Blackwell v. Mills (5), and y. Sanderson (6). No doubt the legislative provisions required consideration in these cases were not identical with HI, but the process of reasoning by which they were decided

ily rejects the notion that expenditure incurred by a er in order to travel from his home to his place of business is, 'sense, a business expenditure or an expenditure incurred in, the course of, earning assessable income. Indeed they go and refuse assent to the proposition that such expenditure y relevant sense, incurred for the purpose of earning asses- income and unanimously accept the view that it is properly d as a personal or living expense. This view agrees | that which we, ourselves, entertain. Expenditure of this is not by any process of reasoning a business expense ; it possesses no attribute whatever capable of giving it the of a business expense. Nor can it be said to be incurred in or producing a taxpayer's assessable income or incurred in on a business for the purpose of gaining or producing his ; at the most, it may be said to be a necessary consequence in one place and working in another. And even if it were nd we think it is not—to say that its essential purpose is ble a taxpayer to derive his assessable income there would still warrant for saying, in the language of s. 51, that it was in gaining or producing the assessable income" or ily incurred in carrying on a business for the purpose of or producing such income". The questions in the cases should be answered in the negative.

Order in each case stated :

The question in the case stated answered: Such sum is not deductible. Costs of the case stated to be dealt with by the judge disposing of the appeal.

s for the appellant in each case stated, Bartier, Perry &

R. A. H.

87) 2 Tax Cas. 246. (4) (1930) 15 Tax Cas. 380; (1930) 122) 128 L.T. 24. 46 T.L.R. 397. 25) 1K.B. 725; (1926) A.C.1. (5) (1945) 174 L.T. 217.

(6) (1955) 3 All E.R. 154.

It is unnecessary to review these cases but of them we H. ©. or A.

1957-1958, ad

Luyyey v. Coms- SIONER OF Taxation.

Williams J. Kitto J. 'Taylor J.