Cooper v Commissioner of Taxation (Cth) [1958] HCA 46

High Court of Australia Dixon C.J. Fullagar and Taylor JJ. Cooper v Commissioner of Taxation (Cth) [1958] HCA 46

ORDER Appeal dismissed with costs.

Cur. adv. vult.

The Court delivered the following written judgment:—

Oct. 23 Dixon C.J., Fullagar and Taylor JJ.

This appeal concerns a claim to a deduction from assessable income under s. 88 of the Income Tax and Social Services Contribution Assessment Act 1936-1956. That provision entitles a taxpayer who has paid a premium in respect of land, premises or machinery used for the purpose of producing assessable income, if he be a lessee or if he be a reversioner who has paid the premium to obtain a surrender of a lease, to deduct, when certain conditions are fulfilled, a proportion of the premium. The facts of the case require a closer examination but it will make it easier to see what is material in the legislative provision if the foundation in fact of the present taxpayer's claim to a deduction is described briefly at once.

In partnership with his wife the taxpayer conducts the business of an hotelkeeper at the Australia Hotel, which stands on a parcel of land in Murray Street, Perth, and is owned by the taxpayer. He is in fact the registered proprietor of an estate in fee simple. But up to the beginning of 1952 he was not entitled to the land in possession. For in 1936 he had granted an estate or interest in possession to certain persons named Guilfoyle and they conducted the hotel business. The term of their interest was until the death of the survivor of them (an event that has not yet occurred) or for thirty-five years from 6th September 1936, whichever should be the longer period. This term was granted by a registered instrument. The taxpayer claims that he got in the interests of the Guilfoyles for considerations which or some of which fall within s. 88 and that consequently he is entitled to a deduction under that provision. His primary case is not that he obtained a surrender of the Guilfoyles interest. The reason why it is not is because in the case of the greater number of the Guilfoyles he took a transfer of undivided shares in the lease containing a provision against merger. He maintains that in respect of those undivided shares, if not of all the shares, his title in possession is to be referred to the lease and not to his fee simple. He says therefore that when he pays the consideration he pays a premium as lessee of the land which is used to produce the assessable income derived by him from or by means of the partnership between himself and his wife as hotelkeepers. Kitto J., by whom the taxpayer's appeal from his assessment was heard, took the view that the first assignment the taxpayer had taken of an undivided interest did merge, there being no provision against merger in the assurance of the interest to the taxpayer [1] . Indeed so much was not denied. But this fact formed, in the opinion of that learned judge, a fatal objection to the taxpayer's claim; for s. 88 relates only to a premium paid not for an undivided share in land but for or in connexion with the lease of an entirety [1] . The taxpayer stood as a person entitled to the land in possession in fee simple in respect of one undivided share, and as to the other undivided shares in virtue of a term to that extent preserved from merger. That, his Honour considered, was not within s. 88.