Producers' and Citizens' Co-Operative Assurance Co Ltd v Federal Commissioner of Taxation [1956] HCA 36

broly =m 21 ATR 71H.C. or A. 1956. red Sypyery, May 8, 9; BRISBANE. July 20. Webb J.

HIGH COURT (1956.

(HIGH COURT OF AUSTRALIA.]

PRODUCERS' AND CITIZENS' CO-OPERATIVE

ASSURANCE COMPANY LIMITED . } ee

AND

FEDERAL COMMISSIONER OF TAXATION . Responpenr.

Income Tax (Cth.)—Assessment—Income or capital—Assessable income—M utual

life assurance company—Investments—Rented premises—Profit-making under- taking or scheme—Intention of taxpayer—-Income Tax Assessment Act 1936- 1948, ss. 6, 26 (a), 197—Life Insurance Act 1945.

The objects of an assurance company registered and incorporated in New South Wales, and which carried on business in all the Australian States, were, among others : (i) to issue policies of life assurance or endowment or annuities or against death or injury by accident, (ii) to invest the funds of the company as the directors may deem most advisable, (iii) to lease, sell, dispose of or other- wise deal with all or any property of the company, and (iv) to invest the funds of the company in or upon freehold or leasehold securities. In 1934 the company's Brisbane agent indicated its desire to relinquish the agency and it appeared to have been assumed that upon that event the company would have its Brisbane office in other premises. In May 1935, the company obtained a further lease for three years of its office accommodation, and in November 1935, upon a recommendation by one of its officers, purchased for the sum of £70,000 the Strand Building which was fully occupied by tenants but it was not, in its then condition, suitable as an office for the company although the company's requirements were small. At that time it was the policy of the company to invest in freehold property its funds from premiums on policies and other sources. The company never made any use of any part of the building for that purpose but continued to lease its office from its agent and also to let the Strand Building for periods of three or five years with provision for repossession by the company in the event of " rebuilding " the meaning of which was not clear. Apart from the recommendation in 1935 referred to above there was not any reference in the company's records, minutes, annual reports or written communications to shareholders to an intention of the company to use the Strand Building for its office purposes. The company sold that building in 1948 for £125,000. An objection by the