Federal Commissioner of Taxation v Robinson and Mitchell Pty Ltd [1941] HCA 29

Appl

felecasters

Non 'AIR 637

Lid

HH. C. oF A.

1941. ed

SypNey,

Aug. 18, 19, 20;

Oct. 3.

McTiernan J.

HIGH COURT

[HIGH COURT OF AUSTRALIA.]

FEDERAL COMMISSIONER OF TAXATION . Apprant;

AND

ROBINSON AND MITCHELL PROPRIETARY R LIMITED _ 7 Resronpent.

Income Tax (Cth.)—Assessable income—Deduction—Retiring allowance paid by company to former managing director—* Losses and outgoings incurred in gaining or producing the assessable income" —" Losses and outgoings necessarily incurred in carrying on a business for the purpose of gaining or producing such income" —Income Tax Assessment Act 1936-1937 (No. 27 of 1936—No. 5 of 1937), sec. 51 (1).

A company paid an annual sum by way of retiring allowance to a former managing director, who still retained his shares in the company. The evidence leading to the inference that he required the retiring allowance to be paid in order that he should get a return from his shares in the company as soon as he ceased to draw his salary as managing director,

Held that the allowance was not a loss or outgoing "incurred in gaining or producing" the company's assessable income, or necessarily incurred in carrying on the company's business for the purpose of gaining or producing such income, within the meaning of sec. 51 (1) of the Income Tax Assessment Act 1936-1937.

AppraL from the board of review.

The Federal Commissioner of Taxation appealed to the High Court against a decision of the board of review upholding a claim by the taxpayer company that an allowance paid to a former managing director was deductible from the income derived by the company during the year ended 30th June 1937.

Sec. 51 (1) of the Income Tax Assessment Act 1936 provides: " All losses and outgoings to the extent to which they are incurred in gaining or producing the assessable income, or are necessarily