June ..co Brisbane MARTIN. Vv. FEDERAL COMMISSIONER OF TAXATION. REASONS FOR JUDGMENT CORAM: WEBB J. DELIVERED.. Sy/mey RP POS SRETAL cow 2 ge. » (REESE carts) These are appeals frow aesesements of incoxe tax in respeet of each of the income yeare ended 3oth June 1944, 1945 and 1966, The ease questions srice of each eppeal, oasely (1) whether the income in question wae derived from winning betz on race-horess; and, if ao, (2) whether it wae the reauit of sarrying on the vusiness of racing or betting er beth. The appellant taxpayer had been successively & carpenter, wortke fereman and a cafe proprietor before the income years in questions; bus during the whole of the first inoome year and for nine wonthe of the second year he wae a hotel-keeper at Ipswich and then beeare a farmer near Prisbane and later near Toowoomba. He eeld hie cafe for absut £1300 in Harch 1943 and a few months later beught the hotel fer 71400, 'The balenee ef hie eapital was then sbout £1000, Te each of te three income years he included in his returne certain eume ae being the proeseds of winning bets, not however ae assessable income, but as Capital veseipts. For the first two years the respondent Commissioner appeare to have accepted these returns as being correet, ae he assessed on the basie of the returns. But after learning of a conviction of the tax ayer for the offence of e¢lling wine for mere than the price fixed by law, he decided te amend the aseesements for the first two ~Be yeare by treating the alleged proceeds from betting as aseessable inceme, In one year the taxpayer won £925 ae prize money for horse-racee; but thie prize money does not appear to have been treated by the Commissioner as actensable income. This may suggest that the Commissioner regarded these alleged betting proceeds as having really been derived from the sale ef liquor. The betting wine claimed by the taxpayer totalled #8928 for the three years in question, being £2398, £3675 and £1864 for the years ended 30th June 1944, 1945 and 1946 respectively. During those years the taxpayer claimed. te have made 662 bete, ineluding 279 winning bets. He eaid that he had no betting tranesetions between 15th August 1943 and 9th February 1944; but he claimed to have won at 23} race meetings out of 29, and te have won 41 betes out ef 77, between Sth February and 30th June 1944. ile aleo claimed te have won at 35 cut of 55 race meetings, and te have won 123 bets out of 265, during the year ended 30th tune 1945: and to have won at 24 cut of 44 race meetings, and te have made 111 winning bets cut of 268, for the year ended 30th June 1946, He further claimed that money ctaked by him during the three income years ranged from 24687 to £10352. During the year 1944 and thereafter the taxpayer purchased several race-horses, One Galled "Nitran" was bought fer £892 and won six rages. Another, "Hale Girl" wae bought for £10C and won three races. She was bought for breeding purposes alec, Three other race~-horees were bought for prices not etated. Cne, "Staffon*, won five races, and each «f the other two won a race. 'he inoome tax return for one year disclosed £950 prize money. ; The taxpayer did not keep reeing atadles; but he employed several trainers, from whem he obtained information for betting purposes. He alse empleyed a man -3- to make bete for him, eo that he might get longer odde. From one bookmaker, Biborne, the texcayer won #1000 im two betes on "Nitram', ome im Bevember 1945 and the other in January 1946, 'lberne was ealled as a witness by the taxpayer and produced hie betting teck showing that two euch betes were wade; but to find that taxpayer wae the person who made thoee betes I have to accept Flberne's and the taxpayer's evidence ag to that, and I de so teecause no suggestion was wade that Flberne wee ret telling the truth. The taxpayer called another Yooknaker, Creighten, whe eaid be had made bete with him, but did not say that any bet was won by the taxpayer. at the time when the bete were made with Klborne and Creighten the taxpayer wae a farmer. im Jenuary 1946 the taxeayer paid £157 for the service of mares with a view to breeding"a horse capable of cartying my colours', as he pub it. The books ef account kept by the taxpayer, first ae a hotel-keeper and later as a farmer, were written up by ene, Hichel, aka a registered taux agent. Hiche) was Called by the taxpayer and sald that the books of account were written up from inforsation supplied by the taapayer, The tiexets for winning betes would have been handed back to the bookmakere in return for the azounts won, Ag te Winning bets then Michel had to rely on what the taxpayer teld him. Taxpayer caid he recorded all hie beta in race books; but that those booke were burnt from time to tine. If the taxpayer's betting and racing operations were as extensive as he claimed, then I think he carried on the business ef betting on rage-horevg during the first inoome year in question and the business of horse racing and betting on horee races during the remaining two years. I base thie view mainly on the considerable auount of tine o4e epent by him on racing and betting eperations, the very large proportion of his eestts and income applied to them, and the ayetematic methods employed by himgwhich were, I think, really directed sere te maxing profit thas deriving pleasure. 'the taxpayer's hotel was a small one as the price he paid for it suggests. His wine quota was only £7 a wonth, He claime he made a loss on the farm of over £500 in the last ef the three income years. It ie not always cacy to conclude that an individual carries on the business of racing or betting when at the came tine he hag ancther business which ordinarily would be a full- time oocupation, On the one hand it might well be that se man of considerable means could give se much time to facing and betting ac the taxpayer did, without being properly found te be carrying en the business of racing or betting, on the other hand, while it is true that in some peculiar circumstances a man might indulge in racing or betting even beyond his means merely for pleasure, it ie more likely te be for profit where his betting or racing transactions are so heavy ae te be out of proportions te his aeeets or income and are systematioally conducted, ae in this esee. However, there ie ne single factor or group of factore that points to a betting or racing business in any case in whieh it apseare, Many factore might be comzen te the activities of two individuals, and yet, because of the presence of other factors, a different conclusion might properly be reached in respect of those persons by the same court. The test is beth eub- jective and objective: it is made by regarding the nature and extent of the activities under review, os well ae the purpose ef the individual engaging in them, and, ag counsel fer the taxpayer put it, the determination is eventumlly based on the large or general impression gained. So fer I have aseuned that the taxpayer was -5- a6 DUey add ae sudeeesful on the race-courses as he claimed. But he bepressed me unfaveurably during his cross-¢xamination, wore particularly ev the nature of the evidence he gave at hie trial fer selling wine above the fixed prise. Hesause of this, and in the face of eertain entries in hie books or account, and for other reasons hereafter appearing, I am not prepared te accept nie evidence us to the extent of hia purchases and selea of liguer. I think it ie more likely than not that much eof his inoome whieh he attributed to betting wine wae the proeteds of zcales of liquor beyond his quotes. He said he purchased from one, Beronec, "one big eaek of wine* containing abeut 60 gallena for about £100, This vas cutside hie quota for wine. a \ sadiefied that he made that purchase on the 19th October 1943, es his teoke show. Hut his becke also show that about two monthe after paying this £100 i.e. on the 18th December 1943, ke paid Here: e¢ a deroait of £12.10.0 on "casks. On having hie attention drawn te thie latter entry he said that he might have been lax in paying boroneo's account. Michel could throw no further light on the matter, beyond suggesting that £12.10.0 cignt have been @ payment for the 'easke*. fgain the texpayer did not put the preceede of hie extra-qucta sales through the eash register, ond gave no sa'isfactory explanation why he did not de se. Further, he said he put receipts from seccomedation in the hetel through the cash register; but that he did net keep a separate agcount of the reecipte from accomodation because the amounts were sail. However during « substantial period he had many american ecldiere staying at the hotel at week ends and charged 6/- ta 10/+ for bed and breaxfast. Ae I find that the taxpeyer did not make & full and true digelocure of ali the material facts nececeary for his aseesement, because he did not state that he wae = 6-6 cartying on the business of racing or betting, er state facets from ~hieh that would have appeared, I hold that the Commissioner was at liberty to amend the aeseaementa, See # 170 (2){b) of the Income Tax Aseesement. Act 1936- 1945, It ie not material that the acsenemente were made vecause the Commissioner may have thought that the money alleged te have been won at betting was really the preceeds ef liquer ealea. it was sufficient that there was in fact not such a full and true disclosure as aforesaid. Then ag regards all three assesements the burden wan on the taxypsyer to prove that they were exceseive, See S, 190 (b) of the Income Tax Assesment Aet 1936 ~ 1942, This durden he has failed to discharge in respect of any of the three income years, The Commiesioner imposed additional tax in accordance with hie authority so to do,smie® under 8.226, and I see no ground for interfering with thie action, or fer making any definite: recommendation te him in relation to auch additional taxgas eubmitted by counsel for the appeliant taxpayer. 'The Commissioner might have felt eonvineed, ae was probably the case, that seme of the income claimed to have been won at betting wae really the preeeeds of salee of liquer, and sete "Feluctant to remit any part ef the additional tax in respect of that income. However he might well see fit to forego additional tax as to the balance of euch income, The whole of euch imeome is taxable, as I have found; but for the purpose of the additional tax. the Commissioner is at liberty to make his own findings as to how mush income wae from liquor eales, and how much from betting. The taxpayer did win £1006 from Blberne and the Commissioner might see fit to remit additional tax attributable to this £1000. — The appeals are diemissed and the aseesements confirmed. The appeliant taxpayer will pay the Commissioner his coste of the appeale. 4d