Commissioner of Taxation v Shields [1999] FCA 1077

FEDERAL COURT OF AUSTRALIA

Commissioner of Taxation v Shields [1999] FCA 1077 TAX – appeal from decision of Administrative Appeals Tribunal setting aside decision to disallow objection against assessment – whether the Tribunal erred in law on the facts as found by failing to properly apply s 51(1) of the Income Tax Assessment Act 1936 (Cth) – whether the respondent was "carrying on a business"

Income Tax Assessment Act 1936(Cth),s 51(1) Administrative Appeals Tribunals Act 1975 (Cth), s 44 Federal Commissioner of Taxation v Brixius 87 ATC 4967, cited Waterford v Commonwealth of Australia (1987) 71 ALR 673, cited Martin v Federal Commissioner of Taxation (1952) 10 ATD 37, cited COMMISSIONER OF TAXATION v RICHARD SHIELDS N 87 of 1999 O'CONNOR J SYDNEY

9 AUGUST 1999

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY N 87 OF 1999

BETWEEN: COMMISSIONER OF TAXATION

Applicant

AND: RICHARD SHIELDS

Respondent

JUDGE: O'CONNOR J

DATE OF ORDER: 9 AUGUST 1999

WHERE MADE: SYDNEY

THE COURT ORDERS THAT: 1. The appeal be dismissed with costs. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY N 87 OF 1999

BETWEEN: COMMISSIONER OF TAXATION

Applicant

AND: RICHARD SHIELDS

Respondent

JUDGE: O'CONNOR J

DATE: 9 AUGUST 1999

PLACE: SYDNEY

REASONS FOR JUDGMENT 1 This is an appeal from a decision of the Administrative Appeals Tribunal ("the Tribunal") made on 11 January 1999 whereby the Tribunal set aside the decision of the Commissioner of Taxation to disallow an objection by the respondent against an assessment issued on 19 December 1996 under the Income Tax Assessment Act 1936 (Cth) ("the Act")in relation to the year of income ended 30 June 1996. 2 The Commissioner in his application claims the following questions of law are raised on this appeal: (a) Whether the Tribunal erred in law on the facts as found by failing to properly apply s 51(1) of the Act. (b) Whether any conclusion was open to the Tribunal other than that the loss suffered by the respondent on the sale of shares was not deductible under s 51(1) of the Act. (c) Whether the Tribunal's conclusion that the respondent was entitled to a deduction for the loss on the sale of shares was reasonably open on the facts as found. (d) Whether the Tribunal's conclusion that the respondent was engaged in a business of share trading was reasonably open on the facts as found. (e) Whether there was any evidence upon which the Tribunal could conclude that the respondent was engaged in a business of share trading. (f) Whether the Tribunal erred in law in finding that the share dealing activities of the respondent had a purpose of profit making. (g) Whether the Tribunal erred in law in finding that each transaction was a commercial operation carried out to derive a profit. (h) Whether the Tribunal erred in law in failing to have regard to the stated purpose of the respondent to profit having regard to dividends payable on the shares. (i) Whether the Tribunal failed to have regard to the following relevant matters: (i) that the overall profit to the respondent was only achieved as a result of the effect of the rebate in tax because of the availability of franking credits; (ii) that there was an overall loss on each transaction having regard to stamp duty and brokerage; (iii) that the respondent's purpose was not to profit on the purchase and sale of the shares. (j) Whether the Tribunal failed to consider, if the loss on the sale of shares was deductible under s 51(1) of the Act, the extent to which a deduction was allowable having regard to the disparity between the income generated from the transactions and the loss incurred on the sale of shares. (k) Whether the Tribunal failed to consider whether the losses were losses of capital, or of a capital, private or domestic nature. 3 The grounds of appeal are : (a) That the Tribunal erred in law on the facts as found by failing to properly apply s 51(1) of the Act. (b) That the only conclusion open to the Tribunal was that the loss suffered by the respondent on the sale of shares was not deductible under s 51(1) of the Act. (c) That the Tribunal's conclusion that the respondent was entitled to a deduction for the loss on the sale of shares was not reasonably open on the facts as found. (d) That the Tribunal's conclusion that the respondent was engaged in a business of share trading was not reasonably open on the facts as found. (e) That the only conclusion open to the Tribunal was that the respondent was not engaged in a business of share trading. (f) That there was no evidence upon which the Tribunal could conclude that the respondent was engaged in a business of share trading. (g) That there was no evidence upon which the Tribunal could find that the share dealing activities of the respondent had a purpose of profit making. (h) That the only conclusion open to the Tribunal was that the share dealing activities of the respondent did not have a purpose of profit making. (i) That there was no evidence upon which the Tribunal could find that each transaction was a commercial operation carried out to derive a profit. (j) That the only conclusion open to the Tribunal was that each transaction was not a commercial operation carried out to derive a profit. (k) That the Tribunal erred in law in failing to have regard to the stated purpose of the respondent to profit having regard to dividends payable on the shares. (l) That the Tribunal failed to have regard to the following relevant matters: (i) that the overall profits to the respondent was only achieved as a result of the effect of the rebate in tax because of the availability of franking credits; (ii) that there was an overall loss on each transaction having regard to stamp duty and brokerage; (iii) that the respondent's purpose was not to profit on the purchase and sale of the shares. (m) That the Tribunal failed to consider, if the loss on the sale of shares was deductible under s 51(1) of the Act, the extent to which a deduction was allowable having regard to the disparity between the income generated from the transactions and the loss incurred on the sale of shares. (n) Whether the Tribunal failed to consider whether the losses were losses of capital, or of a capital, private or domestic nature. 4 The Commissioner seeks orders that the appeal be allowed and if deemed fit, that the application be remitted to the Tribunal to be determined in accordance with law. 5 The respondent objects to the competency of the appeal on the grounds that the purported Notice of Appeal does not disclose a question of law.