Commissioner of Taxation (Cth) v Watson [1953] HCA 98

High Court of Australia Webb J. Dixon C.J. McTiernan, Williams, Fullagar and Kitto JJ. Commissioner of Taxation (Cth) v Watson [1953] HCA 98

ORDER Appeal struck out as incompetent. No order as to costs.

Cur. adv. vult.

The following written judgment was delivered by:—

May 12 Webb J.

Before and during the year 1941 the respondent taxpayer was a shopkeeper in Campbelltown, and sold, among other things, newspapers and periodicals, as well as tobacco, confectionery and ice cream. He disposed of the business in November 1941. His gross weekly takings at that time were £154, including £50 for newspapers and periodicals, £20 for tobacco, and £82 for other commodities. The sale price of this business was £3,428, including £1,644 expressed to be for "goodwill (including the vendor's interest in newspapers and other agencies)". The balance was for fittings, plant and stock. But the respondent also had a lease of the premises with five and a half years to run. This lease was taken over by the purchaser of the business and apparently assigned to him, but for no consideration, or further consideration.

The appellant commissioner treated the £1,644 as a premium for or in connection with goodwill attached to or connected with land, and included £280 of the £1,644 in the assessable income of the respondent for the year ended 30th June 1943 (based on the income derived for the previous year), arrived at by deducting from £1,644 the sum of £1,364 made up of two amounts which the respondent had paid for the goodwill of the premises when he acquired it as the result of two transactions at different dates. In so doing the appellant commissioner relied on ss. 83 and 84 (1) of the Income Tax Assessment Act 1936-1942. The respondent objected on the ground that the £1,644 was not a premium paid for goodwill attached to the land. If it was such a premium the assessment was correct. The Board of Review, to whom the objection was referred by the commissioner, upheld the objection, and the commissioner now appeals to this Court.