Foster Brewing Co Ltd v Federal Commissioner of Taxation [1916] HCA 87

H.C. or A, Income Tax— Assessment—Company— Income— Deduction— Dividends— Pa;

1916. aw Mrxnourne,

Oct.

Griffith C.3., Barton, Isaacs, Gavan Duffy and Rich J.

Griffith 0.5.

THE FEDERAL COMMISSIONER OF TAXA-

HIGH COURT

[HIGH COURT OF AUSTRALIA.]

THE FOSTER BREWING CO. LTD. 5 . APPELLA

AND

TION } Respo: ear

out of profits—Income Tax Assessment Act 1915 (No. 34 of 1915), sec. 16.

'A company, whose assets consisted principally of shares in another company,

July 1915. A few days before each dividend was paid the company ha' money in hand. It had in its books an account called a reserve of the nominal amount of £15,000 which represented undivided profits that had been invested in income-producing property. Immediately before payment of each of the two dividends the company received by way of inco! from its assets a sum rather larger than the amount of the dividend. E sum when received was paid to the credit of the company's banking account which was then overdrawn, and each dividend was immediately paid by cheqi drawn upon that banking account. In its return of income for the y ending 30th June 1915 for the purposes of the Income Tax Assessment 1915 the company claimed to deduct the amount of the two dividends its total income for that year, but the Commissioner apportioned the dividen between the amount appearing in the profit and loss account for the hal ending 31st January 1915 as having been brought forward from the pre half-year and the net profit for the year, and allowed a deduction of only proportionate amount of the dividend so attributed to the net profit for year.

Held, that the fact that in the profit and loss accounts the dividen¢ were debited against the gross sums made up of the net profits of the preced- ing half-years together with the balances brought forward from the previou: periods was not conclusive to show that the dividends sought to be deduct were not wholly income distributed to the members of the company the meaning of sec. 16 of the Income Tax Assessment Act 1915.