AL Hamblin Equipment Pty Ltd v Commissioner of Taxation (Cth) [1974] HCA 44

High Court of Australia Barwick C.J. McTiernan, Mason and Jacobs JJ. AL Hamblin Equipment Pty Ltd v Commissioner of Taxation (Cth) [1974] HCA 44

ORDER Appeals Nos. 9 and 11 of 1974. Appeals allowed with costs and cross-appeals dismissed with costs. Orders of Stephen J. set aside and in lieu thereof order that the appeals to Stephen J. be allowed with costs and assessments remitted for adjustment. Appeal No. 10 of 1974. Appeal allowed in part and cross-appeal dismissed. Order of Stephen J. set aside and in lieu thereof order that the appeal to Stephen J. be allowed in respect of the assessment relating to the Caterpillar 922 Loader but otherwise dismissed and that the assessment be remitted for adjustment. Respondent to pay half of the appellant's costs of the appeal to Stephen J. and to this Court and the whole of the costs of the cross-appeal.

Cur. adv. vult.

The following written judgments were delivered:—

Nov. 4 Barwick C.J.

The facts with which these three appeals are concerned are set out in detail in the reasons for judgment of other members of the Court who participated in the hearing. The basic structure of the facts which relate to the major matter in controversy may be stated as follows.

A taxpayer for the purposes of his business had leased certain machinery and had other machinery on hire-purchase. Finding it expedient, if not indeed necessary, for the purposes of his expanding business to replace such machinery with other plant more suitable to that business, the taxpayer decided to acquire the use of that other plant either by lease or by hire-purchase. He also decided to "trade-in" the existing plant as part of the consideration for the acquisition of the right to use the new plant. The lease under which part of the existing machinery was held nominated the residual value of such machinery as at the termination of the term of the lease. It was contemplated that the lessor of the machinery would sell it at the expiry of the term and that the lessee would pay to the lessor, in addition to the instalments of rent for which the lease provided, the deficiency, if any, between the realized price and the nominated residual value of the machinery. As lessee the taxpayer had no right to purchase the machinery, but it was open to him to negotiate the purchase of the machinery during the currency of the term, so that, by payment to the lessor of the nominated residual value plus the amount of the instalments of rent accrued and unpaid and the amount of the instalments yet to fall due less an allowance for the accelerated time of payment of the latter, the taxpayer became fully entitled to that machinery.