Stanton v Federal Commissioner of Taxation [1955] HCA 56

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{HIGH COURT OF AUSTRALIA.]

STANTON ' 5 : i - é r APPELLANT 3

AND

FEDERAL COMMISSIONER OF TAXATION — ResponpEnT.

H.C. or A. Income Tax (Cth.)—Assessable income—Royalty—Agreement to sell standing timber 1955. at a lump sum price based on amount standing on land whether cut and removed Se or not—Income Tax and Social Services Contribution Assessment Act 1936-1953

MELpourNE, (No. 27 of 1936—No. 28 of 1953) s. 26 (f).

Oct. 17, 18; 5 5 24 A taxpayer and his co-owner of certain land entered into an agreement with

: a sawmiller which provided in substance for the sale to the sawmiller of ae Gel standing timber on the land, with a limitation as to quantity, at a lump sum cna price based upon the amount of timber found to be standing upon the land

KitbordJ- whether such timber was cut or removed or not. The price for the timber

was payable in quarterly instalments which became due independently of the amount of timber removed, so that the full price remained payable without regard to the extent to which the sawmiller might exercise his right to cut and remove the timber. The taxpayer was assessed to tax on the sum of £2,832, being his proportion of the amount payable under the agreement received by him in one fiscal year, the commissioner claiming that it was income received "as or by way of royalty " within the meaning of s. 26 (f) of the Income Tax and Social Services Contribution Assessment Act 1936-1953.

Held, that as the amounts under the agreement were payable by the saw- miller whether or not he exercised his right to cut and remove the timber and were calculated not on the amount taken, the sum in question was not received "as or by way of royalty" within the meaning of s. 26 (f) and accordingly did not form part of the taxpayer's assessable income.