Armco (Aust) Pty Ltd v Federal Commissioner of Taxation [1948] HCA 49

584 HIGH COURT [1947-1948.

[HIGH COURT OF AUSTRALIA.]

ARMCO (AUSTRALIA) PROPRIETARY LIMITED Apprtiant ;

AND

FEDERAL COMMISSIONER OF TAXATION Responpent.

H.C. or A. Income Tax (Cth.)—Assessable income—Deductions—Foreign parent company—

1947-1948, Australian subsidiary company—Goods purchased by subsidiary company from Saad parent company—Prices in foreign currency—Delay in payment—Current Sypney, account with parent company for goods, plant and capital items—Loans by 1947. parent company to subsidiary company—Reasons therefor—Purchase by sub- Tune 20. sidiary company of shares in another Australian company—Shares sold to parent

'illiams J. oe Satisfaction of debt—Discharge of promissory note—Amount required greater

Sypyey, # ie than contemplated—Increased rate of exchange—Loss on exchange in respect of : payment—Capital or income—Income Tax Assessment Act 1936-1944 (No. 27

company—Promissory note given by subsidiary company to parent company—

April 19, oe 22. of 1936—No. 28 of 1944), s. 51 (1)—Judiciary Act 1903-1947 (No. 6 of 1903— aac F No. 52 of 1947), 23 s. (2) (a). Latham €.J., 5 : . Starke, Dixon, The appellant company, which was incorporated and carried on business Meticnin gs, in Australia and which was a subsidiary of a company incorporated in the

United States of America, purchased goods from the parent company for resale. Up to December 1937, the appellant paid cash in dollars, but there- after purchased on credit. In addition, prior to September 1938, the parent company had lent sums amounting to $450,000 to the appellant, and had paid $75,536.90 in America on behalf of the appellant. In September 1938, the appellant's total liability to the parent company as shown by the latter's current account was $1,067,201.75 which had, from time to time, been entered in the appellant's books at the rate of exchange prevailing at the time of each purchase, loan or payment, and appeared therein as £4269,736 12s. 9d. 'The appellant purchased, by arrangement with the American Company, 250,000 £1 shares in another Australian company. In September 1938 the appellant executed a promissory note to the order of the parent company for $1,000,000 payable on demand with interest at 44 per cent in the United States of 'America—this was part of the $1,067,201.75 but was not specifically appro- priated to any of the component parts of that sum. The sum of £253,720 9s. 9d. was then transferred from the parent company's current account to an