Franklin's Selfserve Pty Ltd v Commissioner of Taxation (Cth) [1970] HCA 33

High Court of Australia Menzies J. Franklin's Selfserve Pty Ltd v Commissioner of Taxation (Cth) [1970] HCA 33

ORDER No. 1 of 1969 Appeal dismissed. No. 2 of 1969 Appeal dismissed. No. 5 of 1970 Appeal allowed. Assessment for the year ended 31st July 1965 remitted to Commissioner for amendment to allow as deductible in that year trading losses of the years ended 31st August 1962, 31st August 1963, and eleven months ended 31st July 1964. Order that the taxpayer pay one half of the Commissioner's costs of the three appeals.

Cur. adv. vult.

The following written judgment was delivered:—

Sept. 3 Menzies J.

The Court is here concerned with appeals by Franklin's Selfserve Pty. Ltd. against three income tax assessments upon income derived by the taxpayer during the years ended 31st July 1965, 31st July 1966 and 31st July 1967 respectively. By each assessment the Commissioner has disallowed certain of the taxpayer's deductions of losses, including losses of previous years, which the taxpayer contends were incurred by it and were deductible under the relevant provisions of the Income Tax and Social Services Contribution Assessment Act. The following table sets out the position as claimed by the taxpayer:

Year Ending 31st July 1965 Losses of previous years as claimed $1,698,144 Net Loss for year ending 31st July 1965 $1,928,032 total losses $3,626,176 1966 Losses of previous years as claimed $3,626,176 Net Income for year ending 31st July 1966 $1,481,320 total losses $2,144,856 1967 Losses of previous years as claimed $2,144,856 Net Income for year ending 31st July 1967 $ 541,200 total losses $1,603,656

What the Commissioner did was to disallow all the losses claimed as aforesaid although not disputing that there were trading losses of $1,698,144 prior to 1965.

The taxpayer was incorporated on 19th March 1946 as The New Era Construction Co. Ltd., but I am concerned with it only after 1960 when it had been brought into, what can be described with sufficient accuracy as, the Reid Murray Group of companies as a subsidiary of Reid Murray Holdings Ltd., which I shall hereafter call "R.M.H." and its name had been changed to Reid Murray Development (N.S.W.) Pty. Ltd. In this manifestation I shall call the taxpayer "R.M.D.".