JUDGMENT No............ / "/ oy Aen ssadtsas CATCHWORDS Income Tax - whether deductions allowable by way of investment allowance. Practice and procedure - previous decisions of Full Courts followed without considering their correctness. Income Tax Assessment Act 1936 Pyneboard Pty. Ltd. v. Trade Practices Commission (1982) 57 FLR 368 followed. THE COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA Vv. REX FREDERICK KEARNEY VY. No. G 141 of 1984 Woodward, Northrop and Jenkinson JJ. Melbourne 29 April 1985 IN THE FEDERAL COURT OF AUSTRALIA ) ) VICTORIA DISTRICT REGISTRY ) V. No. G1l41 of 1984 ) ) GENERAL DIVISION ON APPEAL FROM THE SUPREME COURT OF VICTORIA BETWEEN : THE COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA Appellant and REX FREDERICK KEARNEY Respondent COURT: Woodward, Northrop and Jenkinson JJ. DATE: 29 April 1985 PLACE: Melbourne MINUTE OF ORDER OF THE COURT THE COURT ORDERS THAT the appeal be dismissed with costs. (Settlement and entry of order is dealt with by 0.36 of the Federal Court Rules). —_—_ ~ - —— —— en ee oe IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY V. No. G141 of 1984 GENERAL DIVISION ON APPEAL FROM THE SUPREME COURT OF VICTORIA BETWEEN: THE COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA Appellant and REX FREDERICK KEARNEY Respondent COURT: Woodward, Northrop and Jenkinson JJ. DATE: 29 April 1985 PLACE: Melbourne REASONS FOR JUDGMENT WOODWARD and NORTHROP Jd. The Commissioner of Taxation ("the Commissioner") appeals from a judgment of the Supreme Court of Victoria constituted by Tadgell J. setting aside assessments of the respondent ("the taxpayer") for each of the years of income dated 30 June 1979 and 30 June 1980 and remitting the assessments to the Commissioner to give effect to the judgment of the — Supreme Court. Kearney v. Federal F.L.R. 316 ("Kearney's Case"). the appeal to That judgment has he this Court is whe ther error in deciding that the taxpayer deduction by way of investment Subdivision B of Division 3 of Part - Tax Assessment Act steel-hulled Kelly. a deduction from his assessable income amount of a capital nature expended in the of a unit of wholly and exclusively in Australia and for the of producing specified methods not The taxpayer 1936 ("the Ac catamaran-type ves eligible property for use by the assessable relevant had acquired t") sel income ot for the en reported; see Commissioner of Taxation (1984) 68 The sole issue raised on Tadgell J. was in was entitled to a allowance under III of the with respect to a named the James Under that Subdivision a taxpayer is entitled to of part of the acquisition taxpayer purpose herwise than by present purposes. James Kelly in circumstances which entitled him to the deduction unless the James Kelly came within sub-paragraph 82AF(2)(f) of the Act. time, That sub-paragraph provided, at the not apply in relation to: "(£) Before Commissioner Tadgell J. plant or articles relevant that Subdivision B of Division 3 of Part III dad for use in, or primarily and principally in connexion with - (i) amusement or recreation; uw aoe this Court, did not challenge The evidence befor counsel for the the facts found by e Tadgell J. and his income oe ee eee findings are set out in Kearney's case above. They need not be repeated in detail. As appears at p.321, his Honour found: - "J... that the 'James Kelly' is properly and appropriately described as a passenger-carrying vessel and that it is equally well adapted to the carriage of the general public on rivers and harbours for any purpose for which passengers might want to travel aboard it, whether for amusement or recreation or otherwise." At p.321 his Honour, stated the issue raised as follows: "The question, then, is whether the 'James Kelly', havang the characteristics I have described, and having been built and bought by the taxpayer for, and used in, his business of a charter boat operator, was a vessel 'for use in, or primarily and principally in connection with ... amusement or recreation'." In stating the pranciples of law to be applied his Honour said at p.322: "In W. Smith v. Federal Commissioner of Taxation (1982) 41A.L.R. 315 the Full Court of the Federal Court decided that par.(f) of subs.(2) of s.82AF of the Act does not by its terms introduce any notion of use by a particular person. It is concerned with the nature of the articles it seeks to describe and not with the identity of their users. It follows that, 1f the 'James Kelly' is not of its nature a vessel for use in or primarily and principally in connection with amusement or recreation, the use to which it was put or intended to be put, whether by the taxpayer or its passengers, will not alter its Classification for the purpose of the subsection. The Federal Court applied and explained Smith's case in Hamilton Island Enterprises Pty. Ltd. v. Federal Commissioner of Taxation (1982) 43 A.L.R. 519 at p.524, saying that the former decision: ',.. Should not be read as indicating that the use to which the relevant item of personal property is put will necessarily be irrelevant for the purpose of determining whether, for the purposes of s.82AF(2)(£)(i), the item answers the description "plant er articles for use in, or primarily and principally in connection with, amusement or recreation". It may, in a particular case, be common ground that the use to which the relevant item is put corresponds with the use which it ais of its character to serve. In such a case, the examination of the actual use of the item could well be decisive of the question whether it was or was not of a designated character. Quite apart from such cases, the use to which an item is actually put will ordinarily be illustrative of at least some aspects of its character.'" Before this Court, counsel for the Commissioner submitted that the decisions relied upon by Tadgell J. were wrong and ought not to be followed. We reject that submission. Each of those cases was a decision given by a Full Court of the Federal Court in which judgment had been reserved and the reasons for judgment had been reduced to writing. In Pyneboard Pty. Ltd. v. Trade Practices Commission (1982) 57 F.L.R. 368 a Full Court of the Federal Court said at p.371: "Notwithstanding the above submissions on behalf of the appellants, we are of the clear view that this Court should not decline to follow the decision in the first Melbourne Home of Ford case. That decision was given in a considered judgment in March 1979. It ais not suggested that there has been any subsequent decision which has either questioned its correctness or which 15s, in any way, inconsistent with the reasoning underlying it. Where a general guestion going to the validity of statutory notices 1s involved, it is plainly of importance that there be uniformity in the decisions of the Full Court of this Court. In our view, the appellants have failed to demonstrate either that the decision in the first Melbourne Home of Ford case was given per incuriam or that it as plainly and demonstrably mistaken. Nor does it appear that there is any other valid ground for this Court to refuse to follow that decision. In these circumstances, we should follow the previous decision without reconsidering or considering its correctness." The same general observations apply to the present appeal. In these circumstances we should follow Smith's case and the Hamilton Island Enterprise case without considering their correctness. Before us, counsel for the Commissioner submitted Tadgell J. misapplied the principles of law to the facts found; see Kearney's case at p.322-3. In our opinion, his Honour correctly applied the law to the facts found by him. We adopt the same reasoning and reject the submissions by counsel. costs. i i ith Accordingly, the appeal 15 dismissed w IT evrtity thet this and the FIVECS ) Prccedlag pares are a true copy of the Roanw tot Judgment herein of the 4 Etnawable Mr, Justice WOCD WARD + the Henourable Mr. Justice NORAREP. ' b Associate J ¥ Dated: 29 APRIL 48S U cemmecccyais so ee naeemce serene ae, aan IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION ) ) NO. VG141 of 1984 ) ON_APPEAL FROM THE SUPREME COURT OF VICTORIA JENKINSON J. BETWEEN: THE COMMISSTONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA Appellant AND: REX FREDERICK KEARNEY Respondent CORAM: Woodward, Northrop and Jenkinson JJ. PLACE: Melbourne _ DATE: 29 April, 1985 REASONS FOR JUDGMENT I agree that the appeal should be dismissed, and for the reasons stated by Woodward and Northrop JJ. The evidence indicated that the respondent took part the determination of certain design of the vessel. influenced, by considerations flowing from recreational in questions concerning aspects of the If decisions about design had been to be subserved by the vessel, between the vessel and a functions so as to produce differences similar vessel, such as the "Jeremiah 2. Ryan", the design of which had not been so influenced, it might have been possible to characterise the vessel as one "for use in, or primarily and principally in connection with ae aeee recreation". But considerations of that kind did not result in difference, as the learned trial judge found. And the evidence justified his Honour's findings, in my opinion. ce orcs rary . ' ¢8 a ® acer