Commissioner of Taxation (Cth) v McClelland [1969] HCA 72

High Court of Australia Windeyer J. Barwick C.J. Kitto, Menzies and Owen JJ. Commissioner of Taxation (Cth) v McClelland

ORDER Appeal allowed with costs. Assessment set aside. Case remitted to the Commissioner to assess tax in accordance with the directions of the Court. Usual order as to exhibits. Appeal allowed with costs. Order of Windeyer J. set aside and in lieu thereof order that the appeal of the respondent to this Court be dismissed with costs.

Cur. adv. vult.

1967, Nov. 8 Windeyer J . delivered the following written judgment:—

Mrs. D. M. McClelland is a married woman living with her husband and children in Perth. She appeals against an assessment of income tax in respect of the year ended 30th June 1963. Mrs. McClelland (whom I shall call "the taxpayer") had a rich uncle. He died. He left the residue of his estate to her and her brother. As a result they became beneficially entitled in equal undivided shares to an area of some 3,600 acres of land at Rockingham, south of Fremantle. It was apparent that this land would increase in value in the future. Urban population and industry were spreading. The taxpayer wanted to keep the land with a view to the future. Her brother wanted it sold at once. The taxpayer thereupon bought her brother's interest for £40,000. Having thus become entitled to the entirety of the land, not merely a share in it, she sold off a large part, 3,073 acres, for £153,632. The remainder, about 525 acres, she kept. The part she kept is, per acre, the more valuable land as it fronts Safety Bay Road beyond which lies the water of Warnbro Sound. The Commissioner claims that the transaction by which the taxpayer bought her brother's interest and thereafter sold part of the land produced for the taxpayer a "profit" brought to tax by s. 26 (a) of the Act. The Commissioner assessed this profit as £56,951 ($113,902). I shall say something later about the way in which this figure was arrived at. The primary question is whether the taxpayer is assessable at all in respect of any part of the proceeds of the sale of the 3,073 acres. For the decision of that question it is necessary to describe in more detail the transaction into which the taxpayer entered; and to state what I, having heard the evidence, find she had in mind in doing so.