Southern Estates Pty Ltd v Commissioner of Taxation (Cth) [1967] HCA 16

High Court of Australia McTiernan J. Barwick C.J. Taylor, Windeyer and Owen JJ. Southern Estates Pty Ltd v Commissioner of Taxation (Cth) [1967] HCA 16

ORDER Appeals dismissed with costs.

Cur. adv. vult.

1967, June 2 McTiernan J . delivered the following written judgment:—

These matters are income tax appeals. The appeals were heard together. The appellant Southern Estates Pty. Limited was incorporated in South Australia. The founder of the company was Ashby Francis Smith, and it was under his sole control and management. The company was incorporated in 1959 and entered on the business of buying and selling land round Adelaide. In 1958 Smith, the founder of the company, purchased a large tract of land about fifteen miles from Naracoorte. The land was then substantially in its primitive condition. Smith almost immediately set about reclaiming and improving the land with a view to depasturing sheep on it. In 1960, Smith sold a half interest in the land to Southern Estates and by a written agreement made about the same time Smith and Southern Estates became partners in the venture, the former having sole voice in the partnership's affairs. The partnership expended large sums of money in the years of income ended 30th June 1960, 1961 and 1962 in reclaiming and improving the land for the purpose Smith had in view. The work progressed on the southern portion of the land to the stage of sowing it for growth of pasture and on the northern portion nearly to that stage, but the final work done there was ploughing and rolling the soil—seed was not planted. Because of serious illness Smith abandoned the venture, and the partnership necessarily did not go on further with it. It was not practical to bring sheep on to the land until there was adequate pasture: in the ordinary course this would involve waiting about twelve months after seeding. Smith negotiated to sell the property. He effected a sale but at a substantial loss.