Uther v Commissioner of Taxation (Cth) [1964] HCA 80

High Court of Australia Owen J. Uther v Commissioner of Taxation (Cth) [1964] HCA 80

ORDER Appeal allowed. Assessment set aside and matter remitted to the Commissioner to issue an amended assessment to give effect to this decision. Respondent to pay appellant's costs of the appeal.

Cur. adv. vult.

Dec. 18 Owen J. delivered the following written judgment:—

This appeal involves the question whether two amounts, one of £30,044, the other of £3,782, formed part of the appellant's taxable income for the year ended 30th June 1962.

The facts are that the taxpayer was a shareholder in and the Chairman of Directors of a company, incorporated in Victoria, named Best & Gee Pty. Ltd. to which I shall refer as "the Company". Until 1961 the nominal capital of the Company was £60,000 divided into 20,000 preference shares of £1 each, 38,500 ordinary shares of £1 each and 30,000 deferred shares of 1s. each. The issued capital amounted to £49,526 consisting of 17,026 fully paid preference shares, 31,000 fully paid ordinary shares and 30,000 fully paid deferred shares. Of these the appellant held 848 preference shares and 3,640 ordinary shares. He was also a beneficiary in the estate of one George L'Estrange Gee, deceased, and 13,280 ordinary shares in the Company were held by the trustees of that estate. In March 1960 the assets of the Company included shares in a number of subsidiary companies, valued at cost at £163,821. These included 851 fully paid preference and 2,066 fully paid ordinary shares of £1 sterling each in an English company, Lantigen (England) Ltd., valued at cost at £107,704. In June 1960, the Company agreed to sell to Norcros Ltd., a company incorporated in England, the shares held by it in Lantigen (England) Ltd. The purchase price agreed to be paid for each of the 851 preference shares was £3 payable in cash and the total price agreed to be paid for the 2,066 ordinary shares was £497,447, payable as to £194,947 in cash, the balance of £302,500 to be satisfied by the allotment to the Company of 220,000 fully paid ordinary shares of 5s. each in Norcros Ltd. The agreement was carried out, the Company receiving £197,500 in cash and the 220,000 shares being allotted to it. In August 1960, it sold 100,000 of these shares for £250,778 15s. 0d., which was duly paid, and the surplus arising on the sale was credited to an account in the Company's books styled "Capital Profit or Loss on Sale of Assets Account". Later in August 1960 a company named Southcros Ltd. was incorporated in England. It offered 1,177,666 of its ordinary shares each of 5s. sterling to holders of ordinary shares in Norcros Ltd. at a price of 5s. 6d. sterling per share in the proportion of one ordinary share in Southcros Ltd. for every nine shares in Norcros Ltd. The Company, as one of the holders of ordinary shares in Norcros Ltd., was offered and accepted 13,333 shares in Southcros Ltd., for which it paid £4,607 10s. 1d. In December 1960 the Company sold a further 100,000 of its shares in Norcros Ltd. for £268,747 10s. 0d. and the surplus arising from the sale was carried to the "Capital Profit or Loss on Sale of Assets Account" in its books. It also sold 10,000 of its shares in Southcros Ltd. for £39,060 and the surplus arising on that sale was carried to the same account.