Colonial Mutual Life Assurance Society Limited v Federal Commissioner of Taxation [1946] HCA 60

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OBS og HIGH COURT (1946. :

[HIGH COURT OF AUSTRALIA.]

APPELLANT ;

LIFE ASSURANCE SOCIETY LIMITED :

AND

RESPONDENT.

H.C. or A, Income Tax (Cth.)—Assessment—Incomie or capital— Mutual life-assurance society—

1946. ee)

MELBOURNE,

June 11-14 ; July 10.

Starke J

Oct. 10, 11, 14, 15.

SyDNEY, Nov. 25.

Latham C.J., Dixon and. Williams JJ.

Variation of investments to increase effective interest yield—Profit-making scheme —Business—Income Tax Assessment Act 1936-1941 (No. 27 of 1936—No. 69 of 1941), ss. 6, 17, 25, 26 (a).

'The appellant was a mutual life-assurance company limited by guaranteo, the members of which were its policy holders, and the main object of which was to carry on life-assurance and other insurance business. Its operations

included the issue of policies of assurance of various kinds and. the investment of its funds, It was guided in its investments by actuarial calculations which indicated that, to meet its liabilities under insurance policies, it must obtain a certain effective interest yield on its investments. With a view to main- taining, and, where possible, increasing, the interest yield, it either held until maturity securities to which it had subscribed or which it had purchased in the market or sold securities and purchased others with the proceeds, whichever seemed best calculated to effect the purpose. 'The interest yield was the governing consideration, the appellant's general policy being to hold its securities as investments, not to traffic in or make a profit from realizing them. In its income year 1940 the total amount realized from the sale of securities and the redemption of such as it had chosen to hold until maturity exceeded the average cost to it of the securities.