Hooker Rex Pty Ltd v Commissioner of Taxation (Cth) [1970] HCA 23

High Court of Australia McTiernan J. Hooker Rex Pty Ltd v Commissioner of Taxation (Cth) [1970] HCA 23

ORDER Appeal allowed with costs. Assessment set aside. Matter remitted to the Commissioner for amendment. Usual order with respect to exhibits.

Cur. adv. vult.

McTiernan J. delivered the following written judgment:—

1970, July 30 McTiernan J

This is an appeal from an assessment to income tax and social services contribution based upon income derived during the year ended 30th June 1961. The appellant, pursuant to s. 187 (b) of the Income Tax and Social Services Contribution Assessment Act 1936-1961 Cth, has requested the Deputy Commissioner of Taxation to treat its objection as an appeal and to forward it to this Court.

The appellant alleges that the amount of income in dispute was earned in a large land development project by a subsidiary company of the appellant, which was not a private company within the meaning of Div. 7 of Pt III, and which had previously incurred losses amounting to some $500,000 which could be used as an allowable deduction under sub-s. (2) of s. 80 as it then was. It alleges that this profit was matched by the allowable deduction, and consequently almost the entire profit was declared as a tax-free dividend to the appellant company under the provisions of s. 46 of the 1961 Act. The respondent Commissioner has invoked s. 260 in order to tax the amount in dispute in the hands of the appellant.

The appellant company was a subsidiary company in what may be called the Hooker group of companies. During the relevant period this company was engaged in what was known within the group as "horizontal" development, that is, land subdivision and development.

The company which managed the group finances was L. J. Hooker Investment Corporation Ltd. This company secured finance for projects by member companies in the group, advanced money as loans to member companies for their day-to-day needs, and received all money received by member companies. The object was, it was said, to make use of every bit of money within the group rather than have money idle within the group whilst borrowing from outside. All accounting within the group was done centrally in Sydney.