Gibb v Commissioner of Taxation (Cth) [1966] HCA 74

High Court of Australia Barwick C.J. McTiernan, Taylor, Windeyer, and Owen JJ. Gibb v Commissioner of Taxation (Cth) [1966] HCA 74

ORDER Questions in the case stated answered as follows:

(1) No.

(2) No.

Costs of the case stated reserved for the decision of the Justice disposing of the appeal.

Cur. adv. vult.

The following written judgments were delivered:—

Nov. 29 Barwick C.J., McTiernan and Taylor JJ.

The question to be resolved in this case is whether an amount of £41,000, which was received by the appellant on 17th May 1962 from the liquidator of Gibbsons Investments Limited (Gibbsons) in the course of the winding up of that company was, within the meaning of the Income Tax and Social Services Contribution Assessment Act 1936-1961 Cth, assessable income of the appellant. As appears from the case stated this distribution was made out of a fund constituted by the proceeds of the sale of shares in another company—Gibb & Miller Limited—which had been allotted to Gibbsons in 1956 following a resolution of the shareholders of Gibb & Miller Limited that an amount representing profit disclosed by revaluation of the company's freehold property be capitalized and distributed amongst its shareholders in the same proportions as they would be entitled to receive the same if distributed by way of dividend on the footing that they become entitled thereto as capital and that all such capitalized fund be applied in paying up in full at par 90,000 unissued ordinary shares of the company which will be issued and distributed accordingly and that such issue distribution and payment shall be accepted by such members in full satisfaction of their interest in such capitalized fund.

The respondent's assessment for the relevant year, which included the amount of £41,000, was supported by reference to s. 47 of the Act, it being asserted that it was a payment made in the course of a distribution of the character referred to in the section and that the payment was made out of a fund consisting of income derived by Gibbsons and was, therefore, deemed to be a dividend paid out of profits derived by that company. It was not contended that the shares had been acquired by Gibbsons for the purpose of resale at a profit or in the course of carrying on or carrying out any profit-making undertaking or scheme. The only question is whether the fund out of which the distribution was made can be said to have been income derived by Gibbsons.