Evans v Deputy Federal Commissioner of Taxation (SA) [1936] HCA 2

Foll

Her

Taxation 8 Investments

(2005) 60' ATR'560

HIGH COURT [1935-1936.

[HIGH COURT OF AUSTRALIA.]

EVANS . i f 3 5 4 3 . . APPELLANT;

AND

THE DEPUTY FEDERAL COMMISSIONER OF |

TAXATION FOR SOUTH AUSTRALIA —_f R#SPONDENT.

ON APPEAL FROM THE SUPREME COURT OF SOUTH AUSTRALIA.

H.C. or A. Income Tax (Cth.)—Assessment—Shareholder in company—Profit derived by company

1935. sy, ADELAIDE,

Sept. 11, 12, 13.

Mecsovrxe, 1936, Feb. 13.

Rich, Starke Dixon and Evatt JJ.

from any source — Profit arising from sale of assets not acquired for purpose of resale at profit—Mining company—Acquisition of leases by nominees—Subsidiary companies trustees for parent company—Resale by parent company of properly beneficially owned by it—Purpose of acquisition—Enlargemen! of capital by sale of capital assets or obtaining detachable profits by buying and selling assets— Sale of assets in consideration of shares in other companies—Distribution of those shares—Capital or income—Distribution of surplus assets—A ppreciation in value of assets—Income Tax Assessment Act 1922-1930 (No. 37 of 1922—No. 60 of 1930), sec. 16 (b) (i) (1), (2).

'The G. company was registered in 1926 as a mining company. Tt acquired certain leases in the upper portion of the Bulolo River in New Guinea. Its nominees acquired, in the lower part of the river, leases which were later transferred to subsidiary companies with a small share capital all of which was held by the G. company. It also established an air service which was begun for its own purposes but grew into a separate business. Tt did consider- able work on the upper leases, but its capital was at no time sufficient to enable it to work the lower leases, and reports of its directors spoke of exploitation of these leases by other companies. 'The upper leases and the airways under- taking had admittedly not been acquired for the purpose of resale. In November 1927 the G. company disposed of the airways undertaking to the A. company in consideration of 10,000 paid up £1 shares in that company. In June 1929 the G. company sold the upper leases to the N. company and