Williams v Commissioner of Taxation (Cth) [1972] HCA 48

High Court of Australia Stephen J. Williams v Commissioner of Taxation (Cth) [1972] HCA 48

ORDER Order accordingly.

Cur. adv. vult.

Stephen J delivered the following written judgment:—

Oct. 11 Stephen J

This case concerns the provisions of s. 77A of the Income Tax Assessment Act 1936-1968.

The taxpayer, Mr. A. C. Williams, by his return of income for the year ended 30th June 1969, disclosed a loss of $26,232. The Commissioner, however, by an assessment issued on 9th July 1970, assessed the taxpayer to tax on an assessable income of $30,913.

The difference between the loss claimed by the taxpayer and the assessable income asserted by the Commissioner, some $57,000, is, in large measure, attributable to the disallowance by the Commissioner of a deduction of $50,000 claimed by the taxpayer in his return in respect of application moneys paid by the taxpayer to Bridge Oil N.L. in respect of 500,000 shares of twenty-five cents each in its capital paid to ten cents each which the taxpayer took up towards the end of the relevant year of income.

There were certain other items of a smaller value which also went to make up the discrepancy between the taxpayer's claimed loss and the substantial assessable income asserted by the Commissioner but these were not the subject of this appeal when it came to be heard before me; it was confined to the entitlement of the taxpayer to deduct the sum of $50,000 paid as application moneys on the allotment to him of these shares in Bridge Oil N.L.

As appeared from the taxpayer's return of income, he had, in the year ended 30th June 1969, made large profits from the purchase and sale of certain speculative mining shares; these amounted to some $80,000 in that year; Mr. Williams was also the managing director and major shareholder in a company engaged in the import and export business and from that activity derived, by way of fees and dividends, some $11,500. Early in 1969 Mr. Williams estimated that he would, were no steps taken to avert such a situation, have a taxable income of some $100,000 in that year of income and he decided to seek to reduce his taxable income by subscribing for shares which would entitle him to claim deductions pursuant to s. 77A. He accordingly made arrangements, through his brokers, whereby he ultimately applied for one million twenty-five cent shares in Bridge Oil N.L. paid to ten cents, at a cost of $100,000, and half a million twenty-five cent shares in that company paid to one cent, at a cost of $5,000, and these shares were allotted to him on 14th June 1969. He said that he had originally arranged to take up a total of one million of the shares paid to one cent but had been asked to limit his application to only half of that class. Of these shares he sold, on 25th June 1969, the day before the shares were first quoted on 'change, half a million of the ten cent paid shares in Bridge Oil N.L. for their cost price, $50,000, less $950 for brokerage and duty. It is in respect of these half million shares that the Commissioner has disallowed a deduction under s. 77A.